| SAO PAULO, March 16
SAO PAULO, March 16 Brazilian financial
technology company Creditas Soluções Financeiras Ltda tapped the
asset-backed debt market to raise 50 million reais (US$16
million) for auto loan refinancing, its chief executive said, an
area shunned by traditional lenders after soaring delinquencies.
Sergio Furio said the transaction in February was the first
in which Creditas fully decided collection and credit scoring
procedures. Proceeds will go to refinance borrowers at a
fraction of the cost of auto loans from banks.
Creditas partnered with money manager Empírica Investimentos
Gestão de Recursos Ltda to launch FIDC Empírica Creditas Auto,
the investment vehicle bundling the securities.
Local asset managers and family offices bought the senior
and mezzanine portions of the FIDC, Empírica managing 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 driving down some of
the world's highest borrowing costs. A dozen lenders dominate 90
percent of outstanding credit in Brazil.
Consumers in Latin America's biggest country pay an average
190 percent a year for unsecured overdraft, credit card and
consumer loans with banks.
Empírica's Calixto said that institutional investors from
money managers to pension funds were 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 whole new asset class.
Empírica is discussing a transaction that would bundle
Creditas' home equity loans into a FIDC, Calixto said, adding
that it could hit the 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."
Creditas fetched $19 million from investors in a financing
round that concluded this month, including the World Bank's
International Finance Corp, Naspers Ltd's fintech arm and
Brazilian venture capital firm Redpoint eventures.
Brazilian banks have in recent months 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 such a credit facility.
Creditas funds loans 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 collateral.
($1 = 3.1030 reais)
(Reporting by Guillermo Parra-Bernal; Editing by Daniel Flynn)