Publication: Financing Development Through Future-Flow Securitization
Date
2002-06
ISSN
Published
2002-06
Author(s)
Abstract
Securitization of future hard currency
receivables, that is, converting them into tradable
securities, can allow developing country borrowers with good
credit to overcome sovereign credit ceilings, and raise
financing in international capital markets. The note
examines the case of PEMEX, Mexico's state-owned oil
and gas company, which in 1998 issued oil export-backed
securities that received higher ratings from international
credit rating agencies than Mexico's sovereign debt.
Relative to unsecured debt, securitization lowered interest
rates on PEMEX borrowing by 50-338 basis points (0.50-3.38
percentage points). Another example offered is the case of
Banco de Credito in Peru, whose overseas Master Trust in the
Bahamas (an offshore account) makes principal, and interest
payments, forwarding excess collections to its headquarters
in Peru. To increase investor confidence, the amount of
future-flow receivables transferred to the trust was set at
2.5 times debt service requirements. In 1998 this
transaction setup received an AAA credit rating from
Standard & Poor's - higher than Peru's
sovereign credit rating.
Citation
“Ratha, Dilip. 2002. Financing Development Through Future-Flow Securitization. PREM Notes; No. 69. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/9a930617-0256-5b15-af57-1abe1ac41e5c License: CC BY 3.0 IGO.”