Mexico firm securitizes loans to government workers

MEXICO CITY, June 30 (Reuters) - A Mexican finance company is planning to securitize 1 billion pesos in personal loans to government workers, one of the first placements of its kind in the country.

Fitch assigned a preliminary rating of "AAA(mex)" to the issue by Consupago, majority owned by U.S. consumer credit firm Sherman Financial Group, but warned that high interest rates charged to clients creates risk of a backlash from the government.

Consupago makes loans to government employees, charging annual interest rates equivalent to 80 percent and deducting monthly payments directly from their salaries, Fitch said.

"Because of the level of the interest rate in this kind of business, there is a risk that at some point the government could intervene to try and regulate the rates charged to consumers," Fitch said.

The comment by Fitch underscores a debate about consumer interest rates in Mexico, where senators in April approved a plan that could curb credit card rates.

If lower house lawmakers approve the legislation, that could lead Consupago's clients to prepay their debt more quickly as cheaper credit options become available, Fitch said.

"There is no fixed amortization table," Javier Miranda, Consupago's director of finances, told Reuters. "If the people prepay a lot, the credit will be paid down early."

Government-backed home lender Infonavit and smaller finance companies in recent years have begun to sell parts of their debt portfolios to pension funds, insurance companies and other investors. But securitizing unsecured consumer debt is rare.

Consupago's placement, planned for the first half of July and equivalent to $76 million, will pay investors Mexico's TIIE inter-bank interest rate plus a spread.

Bank executives argue that interest rates in Mexico are higher because of higher risk of defaults and weak laws to help them recover debts. ($1 = 13.20 pesos)

(Reporting by Noel Randewich; Editing by Richard Chang)