(Updates with additional details on deal structure in
By Guillermo Parra-Bernal
SAO PAULO, March 16 Brazilian financial
technology company Creditas Soluções Financeiras Ltda tapped the
asset-backed debt market to raise 50 million reais ($16 million)
for auto loan refinancing, an area shunned by traditional
lenders after soaring delinquencies.
The transaction, which took place in February, was the first
in which Creditas fully decided collection and credit scoring
procedures, Chief Executive Officer Sergio Furio said. Proceeds
will go to refinance borrowers at a fraction of the cost of auto
loans from banks, he added.
Creditas partnered with money manager Empírica Investimentos
Gestão de Recursos Ltda to launch an investment vehicle bundling
the securities, FIDC Empírica Creditas Auto. Local asset
managers and family offices bought the senior and mezzanine
portions of the FIDC, Empírica partner Leonardo Calixto said.
Creditas' auto loan bet helps fill a void left by large- and
mid-sized lenders, which partially exited that market five years
ago after surging defaults. During that period, outstanding auto
loans by Itaú Unibanco Holding SA, Brazil's No. 1
bank by assets, shrank by about 70 percent.
Use of securitization could help fintechs fund loan
origination more efficiently, potentially helping drive down
Brazil's borrowing costs, the highest among the world's top
economies. A dozen lenders dominate 90 percent of outstanding
credit in Brazil, limiting competition.
Institutional investors from money managers to pension funds
are increasingly eyeing fintech-oriented FIDCs, because of their
longer maturities than more popular receivable-backed debt, low
price volatility and the access they provide to a new asset
class, Empírica's Calixto said.
The asset manager, which oversees about 1.3 billion reais in
credit investments, is currently analyzing a transaction that
would bundle some of Creditas' outstanding home equity loans
into an FIDC, he said. The transaction could hit the local
market by mid-year.
"Investors have understood the idea that a migration towards
secured credit will eventually generate more credit underwriting
volumes and origination efficiency," Creditas' Furio said. "They
want to be a part of it."
Currently, Creditas funds loan origination using capital
from investors or through partnerships with traditional
financial institutions. Its hybrid financing model allows it to
originate loans using the borrower's home or automobile as
Brazilian banks in recent months have turned their attention
to how local fintechs are operating, after witnessing how peers
in more mature markets were caught off-guard.
Fintechs represent a small portion of Brazil's banking
services, though segments such as credit cards, financial
advisory and consumer lending are growing fast.
Secured personal credit accounts for 1 percent of Brazil's
outstanding lending, a sign large banks have overlooked a
segment that could thrive as benchmark domestic interest rates
Creditas could offer auto refinancing at monthly rates
between 1.99 percent and 3.65 percent, corresponding to an
annual rate of about 37 percent. Banks charge 120 percent
annually for consumer loans.
Individual borrowers in Latin America's biggest country pay
an average 190 percent a year for unsecured overdraft, credit
card and consumer loans with banks.
The junior, or subordinated tranche of the FIDC stayed with
Empírica and Creditas, which hold equal parts of it, both
executives said. Senior and mezzanine portions of an FIDC rank
first in repayment order to investors ahead of subordinated
($1 = 3.1030 reais)
(Editing by Daniel Flynn and Chizu Nomiyama)