FERRERE advises Pronto! in loan securitization

Ferrere Abogados advised Pronto! on a extremely successful local bond issue involving securitization of a portfolio of consumer loans. The issuance was made on October 7.

Pronto! is one of Uruguay’s largest consumer credit companies. At the beginning of the year, it was acquired by Scotiabank. Scotiabank bought the company from Advent International Fund, Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N.V (“FMO”), and other local and regional investors.

While this is not the first consumer loan securitization made by Pronto!, this has been the most successful in the market, both in terms of bids received and prices offered.

The transaction was carried out by issuance of bonds through a financial trust administered by EF Asset Management, the largest private trust administrator in Uruguay. Four types of bonds were issued with different rights and priorities. They included a preferred Series A Bond, subordinates Series B and C Bond, and a remaining Participation Certificate equivalent to the trust’s equity.

The Series A Bonds were rated AA(uy) by Standard & Poor’s, and the Series B Bonds were rated A(uy), a very good local rating.

The issue was for a total of 58.9 million of Indexed Units (approximate US$ 7.2 million), with demand received for the bonds for approximately US$ 26 million. The offering was done by Dutch auction on the Electronic Securities Exchange (BEVSA).

The cut-off interest rate for these bonds was 4.22% for the A Bond and 4,87% for the B Bond.

FERRERE was deal counsel on the transaction advising Pronto! and EF Asset Management, with a team led by partner Diego Rodríguez, who says:

“The demand for the bonds was higher than four times the amount offered and the most surprising event was that the price offered was better than the price paid by the Government to issue debt in similar conditions. This is the most remarkable characteristic of this issuance which made it one of the most successful in the Uruguayan capital market. The transaction’s success has encouraged the company to continue using this instrument.”