InterAmerican Development Bank Private Sector Department Capital Markets Unit

1
Inter-American Development BankPrivate Sector
DepartmentCapital Markets Unit
Mortgage Backed Securities and Business
Securitization Bond
Washington DC, June-03
2
GUARANTEED BOND FOR BANCO COLPATRIA
3
Colpatria Transaction

• Assets administered 2.8 trillion
• Patrimony was 230.088 million as of December
  2002
• Mortgages were 46.5 of the total loan portfolio
• Commercial loans were 38.5 of total loans
• Consumption loans were 15 of the total loans
• The Bank had 2.809 officials as of December 2002
• A network of 121 offices and 200 automatic
  cashiers
• The margin of solvency as of December 2002 was 11

4
Background
The Corporations of Savings and Loans (CAVs)
channeled the savings of their clients for the
long-term financing from loans through
index-linked savings system (UPAC). Until the
beginnings of 1998, the system mortgage
prospered, allowing Colombia to achieve one of
the highest ratios Mortgage Debt / GDP in Latin
America. The 12 levels were exceeded only by
Chile, with a mortgage debt equal to 17 of the
GDP. (In United States this indicator is
situated at present around 68.)
1972 - 1997
1998 - 2001
During 1998, the rates of interest rose to very
high levels, causing a financial crisis and
eventually the abandonment of the UPAC system.
The crisis of the financial sector worsened
because of the economic recession and by the
sharp drop in the value of the real estate during
this period. The combination of these factors
struck harshly the mortgage market. This was
reflected in an important increase in NPLs and
in a collapse of the demand for new mortgages.
5
Evolution of Real Estate Prices
Estrato bajo
Estrato medio
Estrato alto
1994
1996
1998
2000
2002
2004
2006
2008
Index 100 January 1994
6
Background
2001-2002

• As an answer to the crisis, the Government took
  several measures to stabilize to the SL sector.
  These included
• The introduction of a new law of SL that sought
  to promote the savings and long-term debt (Law
  546)
• The introduction of a new index tied to the
  inflation (UVR) to stabilize the rates of
  interest
• Incentives for the construction of new houses.
• These actions resulted in a recovery of the
  construction sector, which has grown since mid
  2002.

7
Completed Constructions in M2
(6 metropolitan areas)
3.000
80
65
60
2.500
40
2.000
20
1.500
0
1.000
-20
500
-40
m2
-
-60
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Jun-97
Jun-98
Jun-99
Jun-00
Jun-01
Jun-02
8
Background

• With the growth of the construction sector,
  Colpatria as well as other banks, experienced an
  increase in the demand of mortgage products.
• This renewed demand motivated Colpatria to
  explore new products that allow them to obtain
  long-term financing for its mortgages and to
  seek structured products to use its active
  portfolio in a more efficient manner and to
  reduce its lending costs. This it is the case of
  the mortgage bond guaranteed partially by the
  IDB.

2002-03
9
Characteristics

• General Guarantee Multibanca Colpatria
• Especific Guarantee Mortgage loans with an A,
  rating and with especial selection criteria
• Overcollateralization 25 in A Loans
• Aditional Guarantee 10 PCG by the IDB of the
  outstanding issue
• Other Securities Covenants
• Trigger Events
• Default Events

Reserve Account Collection Account
10
Colpatria Bond Structure
Waterfall (security package)
Corporate Guarantee (Originator)
Debt Service Reserve Account and Collection
Accounts
Mortgages Loans Type A
Over-collateral Mortgage loans
Pool Credit Guarantee (IDB)
11
Mortgage Bond Structure

• Mortgage Pool
• Reserve and Collection Accounts
• Overcollateralization of 25
• IDB Guarantee 10

TIPS
B.H.
12
Mortgage Bond Structure
13
Guarantee Structure
14
Peru Infrastructure Developer Bond Guarantee

• Asset Backed Securitization
• Partial Credit Guarantee, Back-stop facility
  supporting principal recovery

15
Contents

• IDeveloper Group Business description
• Term Sheet Summary
• Bond Structure
• Trust Structure
• Securitization Trust
• Waterfall Structure
• Internal Credit Enhancements
• Partial Credit Guarantee
• Structure
• Triggers

16
IDeveloper Business Description

• IDeveloper Group is the largest engineering
  services group in Peru with around US200 million
  of total assets and US180 million in revenues.
• It is mainly dedicated to the business of
  engineering and construction services.
• It also provides petroleum services (fuel
  terminals, drilling, extraction), information
  systems, engineering and real estate developing
  services.
• Strategic investments in concessions and public
  service companies. It is the operator of the
  first toll road concession in Peru (Arequipa).
• 70 years of history and excellent work completion
  track record.
• BBB (triple B) national scale rating as a
  corporate by Fitch and Equilibraim, local rating
  agencies

17
Term Sheet Summary

• Bond Profile
• Amount US50,000,000
• Term 8 years
• Grace period 6 months
• Amortization Semi-annual principal and interest
  payment
• Type of payment Equal coupons (principal
  interest),
• mortgage style
• Coupon amount US4.3 million (with 8.5
  interest rate)
• Final payment October 2011
• Shadow rating -AA/AA
• Guarantee Structure
• Amount Up to US20 million by IDB and FMO
• Coverage Callable for the full amount as a
  back-stop facility
• for reduction of principal under consecutive
  events of default

18
Bond Structure - Trust Structure

• Assigned Cashflows
• Level 1 Segregated assets from
  non-construction subsidiaries
• IMI S.A. - Information technology, platform
  service
• IMD S.A. Engineering service
• IMT. Toll road concession
• IMP S.A. Petroleum and fuel terminal operation
• Level 2 Sales from GyM S.A.
• Pre-funded Debt Service Reserve Account
• Equal to 2 coupons (one year debt service)

19
Bond Structure Securitization Trust
Excess cash after structure waterfall Flows back
to IDeveloper Group
Excess cash after structure waterfall Flows back
to IDeveloper Group
20
Bond Structure Waterfall Structure

• Debt Payment Account (DPA)
• DPA will trap 1/6 of coupon payment due monthly
  for first 3 months, and withhold all cash inflows
  until 100 of coupon is funded by the end of the
  4th month.
• Debt Service Reserve Account (DSRA)
• DSRA will be pre-funded for amount equivalent to
  one year debt service (two coupons)
• Provision Account (PA)
• PA will withold excess available cashflow to
  accumulate funds for prepayment in the good
  economic years, to counteract cyclicality of
  the construction business.
• Acceleration Account (AA)
• AA will be funded (excess and normal cashflows)
  to accumulate funds for prepayment when certain
  financial covenants trigger acceleration of 100
  cash withholdings.

21
Bond Structure Cascade mechanism
Intertítulos - Trustee

Servicing accounts
EBIDA
Bank 1
Trust
Bank 2
...
Collection Account
Bank X
(100 of EBIDA)
Flows - Exp
100 of Collections - EBIDA Ebida will be
defined as a of Collections
Coupon Account
Flows - Exp - Coupon
Collections for 100
Reserve Account
Flows - Exp - Coupon -Rsv
In case no other accounts need to be filled
Acceleration Account
Flows - Exp - Coupon -Rsv - Acc
CONCAR GMP G M D G M I
Provision Account
Flows - Exp - Coupon - Rsv - Acc - Prov
22
Bond Structure Internal Credit Enhancements

• Corporate Guarantee by the IDeveloper Group
• Pre-funded and replenishable Debt Service Reserve
  Account
• Immediate funding of the Debt Payment Account
• Pre-funded debt service reserve account
• Pre-funded from the bond proceeds for an amount
  equivalent to two installments of principal and
  interest
• Step-in rights through trust ownership of shares
• The shares of IMT, IMP, IMI and IMD (Originators
  of the Segregable Assets Level 1) are
  transferred to the securitization trust.

23
Partial Credit Guarantee - Structure

• Partial Credit Guarantee of up to US10 million
  each by IDB and FMO (which covers 40 of the
  initial bond face value)
• The guarantee will be callable for the full
  amount of US20 million
• Back-stop facility for reduction of principal
  (prepayment) under an even of default
• Market-based pricing based on assessment of risk
  bearing from a A/A risk (with internal
  enhancement) to AA-/AA risk with the enhancement
  of the guarantee

24
Partial Credit Guarantee - Triggers

• The Gurantee will be triggered only after a set
  of events and actions occur
• Waterfall the cashflow assigned to the trust
  are insufficient to cover the debt service due in
  the DPA.
• Corporate Guarantee The Trustee will request for
  the corporate guarantee to cover the shortfall in
  advance of the payment date, and the corporate
  guarantee does not deliver the required amount
• Provision Account and Acceleration Account The
  Trustee has utilized all amounts available in PA
  and AA but it is still insufficient to cover the
  payment
• DSRA The balance of the DSRA is insufficient to
  cover the required amount
• Corporate Guarantee does not replenish the DSRA
  within the deadline

25
Inter-American Development BankPrivate Sector
DepartmentCapital Markets Unit
Washington DC, june-03