Brazilian States, Local Governments Eye Tax Securitization

Some Brazilian states and municipalities are currently considering securitizations of future tax revenues.

  • 20 Nov 2007
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-- Olivia Thetgyi

Some Brazilian states and municipalities are currently considering securitizations of future tax revenues. The securitization would give them access to an alternative source of funding, said Jean-Pierre Cote Gil, associate director at Standard & Poor’s in Sao Paulo.

Currently, Brazil’s Fiscal Responsibility Law limits the amount of debt a governor may assume under his administration, Cote Gil explained. Securitization would help local government get around the restriction and help municipalities with weak credit quality achieve cheaper funding.

Government officials and banks have to overcome a number of hurdles to make the securitization possible. For one thing, regulations covering what governments can do to recover taxes are different from other types of debt servicing, Cote Gil said. “The performance of these transactions would depend on the structure proposed, specifically how they would isolate or mitigate the government-specific potential interference risk,” he said. In addition, structurers would have to come up with a way to prevent them from being affected by the potential future tax renegotiations permitted under Brazilian tax law. “Investors and arrangers would have to come up with a structure that guaranteed the true sale of the flows.”

  • 20 Nov 2007

GlobalCapital European securitization league table

Rank Lead Manager/Arranger Total Volume $m No. of Deals Share % by Volume
1 Bank of America Merrill Lynch (BAML) 6,415 22 12.84
2 Citi 5,781 17 11.57
3 BNP Paribas 3,530 14 7.06
4 Credit Suisse 2,783 8 5.57
5 Rabobank 2,633 4 5.27

Bookrunners of Global Structured Finance

Rank Lead Manager Amount $m No of issues Share %
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1 Citi 98,446.48 276 13.35%
2 Bank of America Merrill Lynch 90,174.33 262 12.23%
3 Wells Fargo Securities 70,282.48 216 9.53%
4 JPMorgan 51,967.93 167 7.05%
5 Credit Suisse 41,447.11 125 5.62%