TEXT-S&P Mexico SF outlk:obstacles remain, but signs Pt to recovery

(The following statement was released by the rating agency)

Jan 10 - Mexico's securitization market could be headed toward a recovery in 2012, as long as inflation, unemployment, and interest rates remain stable or improve, according to a recently published report by Standard & Poor's Ratings Services.

New issuance amounts will likely remain the same as 2011 (US$3.4 billion), but Standard & Poor's expects new issuers to emerge with transactions backed by new asset types and fewer negative rating actions across the board.

"The coming year could be a positive one for the market, but there are still several reasons to be cautious," said credit analyst Maria del Sol Gonzalez de Cosio. "The debt market remains somewhat unsteady, investors continue to avoid risk, and the prevailing global economic uncertainty could put pressure on the country's growth prospects in 2012."

During 2011, Standard & Poor's assigned new ratings to 28 Mexican structured finance transactions, 27% more than the 22 deals it rated in 2010. The amount of those issuances declined 23%, however, to Mexican peso (MXN) 46 billion (approximately US$3.4 billion) in 2011 from MXN59.7 (US$4.4 billion) in 2010. In our opinion, these smaller transaction sizes could be due to investors' increased aversion to risk and the fact that many of the transactions were issued in the private rather than public market. In addition, the number of downgrades on Mexican structured finance transactions diminished significantly in 2011, by more than 50% compared to 2010, and we expect more of the same for 2012.

Standard & Poor's outlook for Mexico's domestic structured finance market also includes the following:

-- A few new issuers will likely join the older, savvier originators, such as Infonavit and Fovissste, which led issuance during 2011.

-- Infonavit and Fovissste will likely continue to be the only institutions to issue residential mortgage-backed securities (RMBS) through regular securitizations and the HITO (Hipotecaria Total) platform. We believe banks could return to the RMBS market in the medium term but only if it makes sense economically (e.g., if spreads decrease sufficiently) or if global regulatory updates make holding assets on their balance sheets more onerous. RMBS will likely remain the primary asset type with the largest issuance amount in 2012.

-- States and municipalities could return to public issuances using debt secured by future local tax revenues and federal tax participations, given their need to refinance upcoming maturities and due to the new capitalization rules for these types of loans, which have increased the capital requirements of banks that grant these loans.

-- Issuers will continue to bring to market securities backed by assets that have performed in line or better than our expectations in the current economy, such as auto loans (retail and wholesale), consumer loans, auto and equipment leases, and trade receivables. And given these transactions' ability to withstand the downturn, we could see new asset-backed securities issuers in 2012.

For the full article, see "Mexican Structured Finance 2012 Outlook: Obstacles Remain, But The Signs Are Pointing Toward A Recovery," published Jan. 9, 2012.