Interview with Vernon Budinger, CEO and CIO, from Latin America Structured Finance Advisors at Bonds, Loans & Derivatives Brazil 2016.
Well structured finance is actually a perfect vehicle well maybe not perfect but very good for helping companies access capital because with structured finance a lot doesn’t depend on the company itself it depends on maybe the assets that the company is using for collateral and therefore it separates that the company and the company’s issues in the company’s balance
Sheet from the capital raising function so for instance few years back the metro system here in brazil raise money by selling anticipated receipts from the toll gates boost to enter into the metro system and this enabled them to kind of separate set up a separate form of capital that didn’t really need didn’t necessitate the reliance on the balance sheet of metro and
So the same thing can be used for instance a while back petrobras set up what they called their suppliers program where petrobras provided the name of their top suppliers and their suppliers were able to receive financing through asset backed securities in brazil asset-backed securities in brazil different from almost every country in the world and in most countries
They use a special purpose vehicle more like a trust in the united states here in brazil the special purpose vehicle choice is what’s called a fujiki or fondo de investimento jericho’s collegiate oreos actually for real estate investment trust it’s the same it’s also an investment fund like a mutual fund in the united states but the key thing for the funds here
In the asset backed securities here is that the coupon is not guaranteed it’s just promised it’s it’s stated and then in the bylaws of the fund they have certain triggers i say if the coupon is not paid in full certain things have to happen to protect us senior shareholders whereas in the united states if an asset-backed security doesn’t pay it’s in default and so
There’s a a very distinct legal difference between asset backed securities in brazil and asset-backed securities and almost any other place in the world well i think so the public sector could definitely use structured finance for some of the infrastructure and other than that almost any sector can benefit that you see a lot of the the agricultural sector is using
Now what’s called cross there’s receivables certificates of receivables and agriculture if you translate it loosely from portuguese and also you have the same types of certificates for property and residences they’re called crees certificates for real estate and also then they sometimes they set up the real estate as what’s called a fee fund lg investment or mobile
A reo which is actually a fund for real estate investment so there are a lot of vehicles and almost any industry can benefit especially if the industry sells products to in especially outside of the united outer side of brazil they can sell their invoices to a special purpose vehicle and raise money that way so it doesn’t really for almost every industry there’s
A special purpose vehicle that could help them well for the fuji keys the witch fujiki is a fondos de investimento angelitos credit orioles which is an investment fund for credit rights most of the senior shareholders are banks and also investment funds here in brazil because the taxes are too high on the investment for foreign investors so it doesn’t make sense
On an after-tax basis to buy them you know for for foreigners to buy them unless you’re a tax exempt foreigner a lot of the mezzanine pieces have tended to go to some of the state institutions such as retirement funds for the state or the municipalities and then the subordinated tranches tend to be family offices hedge funds and hedge funds and other investment groups outside of brazil
Transcribed from video
Interview with Vernon Budinger from Latin America Structured Finance Advisors By Bonds \u0026 Loans
