Introduction

The Peruvian economy is experiencing a mild growth across the different sectors and activities. For 2023, Peruvian GDP is expected to grow by 0.8%, due to the impact of commodities prices, political uncertainty and meteorological phenomena, among others. Notwithstanding this, the securitisation structure continues to be a useful tool in order to reduce (at least partially) the risks inherent to all financing structures.

The main developments in securitisation trends and practices for 2023 include the following.

• The development of opportunities to carry out asset securitisation processes given the economic effects of the COVID-19 pandemic.
• At the pinnacle of the COVID-19 crisis, the adoption by the Peruvian government of securitisation programmes created to serve as guarantee to safeguard the stability of the economy.
• The development of asset securitisation processes given the economic effects of “El Niño”, the meteorological phenomenon (“Climate Event”) consisting of increased rainfall that currently affects road infrastructure, urbanisations, supply chains and agribusiness development, among others.
• The Municipality of Lima has announced the issuance of bonds to finance urban transport projects.
• The creation of a securitisation trust for urban transport infrastructure development in Lima and Callao, as safeguard to obtaining loans and financial resources for the aforementioned projects.
• The growth of local REITs (Real Estate Investment Trust – FIBRA by its acronym in Spanish).
• The initiative to develop a secondary market for low-income housing by the Peruvian Housing Development Bank (Fondo MIVIVIENDA).
• During 2023 Dina Boluarte, Peruvian President, announced the creation of the first securitisation trust, for infrastructure projects promotion and the execution of the National Sustainable Infrastructure Plan for Competitiveness 2022–2025 (PNISC 2022–2025 by its acronym in Spanish).

Market Developments

MML securitisation bonds

The Municipality of Lima has announced, in December 2023, the issuance of bonds to finance urban transport projects, for the sum of PEN1,205 million, which is part of an issuance programme totalling PEN4 billion. This strategic initiative aims to prioritise four crucial infrastructure projects. The transaction represents the largest local currency capital market issuance of the year.

The funds raised through the above-mentioned securitisation bonds issuance will be used to finance several key initiatives. Among said initiatives are:

• the expansion of the Metropolitano bus network (transit bus system that operates in Lima);
• the construction of the San Juan de Miraflores–Independencia (two peripherical districts) aerial cable car urban transit system;
• the development of a new train system; and
• the development of retaining walls to mitigate potential risks of river overflows.

This comprehensive approach underscores the municipality’s commitment to carry out essential infrastructure projects for the benefit of the community.

Securitisation trust for urban transport infrastructure development in Lima and Callao

The urban transport system in Lima (capital city) and Callao (nearest province) lacks developed infrastructure, leading to security concerns and elevated transport costs, among other issues. To address these, Legislative Decree No 1613 has been enacted. According to the provisions of this Legislative Decree, the Urban Transportation Authority for Lima and Callao (ATU, by its acronym in Spanish) will act as trustor, enabling the transfer of specific assets and rights to a securitisation trust. The primary objective of this transfer is to secure credits and financial resources, with the purpose of developing urban transport infrastructure projects in Lima and Callao.

Projects initiated under this securitisation trust may be executed through various modalities, including:

• Government-to-Government;
• the National Supply System regime;
• Private Investment National System regime; or
• Public Works Tax Deduction modality.

Comparison between the amount of offers registered with the SMV in 2019, 2020, 2021 and 2022

In 2019, securitisation bonds amounting to PEN230 million were placed through primary public offerings; in 2020, 2021 and 2022, there were no securitisation bonds placed through primary public offerings. Likewise, in 2023, no securitisation bonds were placed through primary public offerings.

However, the above does not mean that the market is stagnant. Private placement of securitisation bonds/certificates are not public and publicly disclosed filings of existing REITs show that the securitisation market remains profitable.

Further, even though new issuances have not occurred through public primary offerings in the past three years, the Peruvian market as of November 2023, had over USD420 million in placed securities issued through securitisation structures through primary public offerings. 

Comments on leading cases

The first and main regulated REIT in Peru has a USD500 million framework programme registered before the SMV. As of November 2021, a total of USD60 million of securitisation bonds backed up by said trust had been placed on the market.

On the other hand, on 27 November 2020, the SMV registered the largest programme in the history of the Peruvian securities market for up to USD2 billion with respect to a REIT.

Comments about the development of private offers

Although as a general rule private offerings of securities are outside the scope of supervision of the SMV, according to Article 333 of the Securities Market Law (LMV by its acronym in Spanish, and Article 332 of its Unified Text (Texto Único Ordenado) published in 2023), private offerings of securitised instruments may only be offered to institutional investors. Likewise, the securities acquired by these investors may not be transferred to third parties, unless they do so in favour of another institutional investor or the security is previously registered before the Public Registry of the Securities Market.

According to the Income Tax Law, in cases of securitisation carried out through REITs, it is the investor who must pay the tax and not the trust itself. In this sense, the rates that the law has established (which are listed in Resolution SMV No 021-2013-SMV-01) have been quite attractive for the market:

• 5% for individuals;
• 29.5% for companies; and
• 0% for institutional investors.

The preferential rate for institutional investors serves as an incentive to structure financing schemes through securitisation programmes aimed at institutional investors.

In addition, the average time for approval of a public offering is usually approximately 30 business days and the registration of securities entails the obligation to periodically disclose information as a material event (hecho de importancia). Such additional costs and obligation to disclose information on a periodic basis have in certain cases led companies to opt for securitisation schemes through private offerings.

Reactiva Perú

Description of the programme through the securitisation scheme

The Peruvian declaration of emergency and mandatory social distancing generated a negative impact on the local economy, decreasing spending and affecting the income of Peruvian companies. With this in mind, to protect the payment chain, the Peruvian government approved a guarantee programme to provide working capital, named Reactiva Perú, for up to PEN60 billion, through Legislative Decree 1455. This programme has two financing forms: (i) individual guarantee and (ii) portfolio guarantee, the latter being a securitisation trust that facilitates the granting of national government guarantees. It should be noted that, notwithstanding termination of the emergency regime, the Peruvian economy continues to be affected, which is why the programme has been expanded by regulations issued in September 2023. In November 2023, the Peruvian Prime Minister announced that amendments to the above-mentioned programme shall take place in the next few months.

The programme allows companies in the financial system (ESF by its acronym in Spanish) (with their own funding) to choose to provide working capital loans to those companies that meet the programme’s eligibility requirements. In turn, the ESFs enter into a guarantee agreement with Corporación Financiera de Desarrollo (a Peruvian state-owned development bank – COFIDE by its acronym in Spanish) that establishes the terms for granting the national government’s guarantee to the loans placed by the ESFs, which will be transferred to a securitisation trust to be administered by COFIDE as trustee and securitisation company and whose trustee is the Ministry of Economy and Finance.

In that sense, the ESFs transfer to the trust the credit portfolios they have placed under the programme. In consideration for the transfer of the loan portfolio, two certificates of participation of the trust are issued: (i) for the percentage covered and (ii) for the balance of the portfolio without additional guarantees.

The guarantees of the programme only serve as a back-up as long as they are used, exclusively, in operations of the Central Reserve Bank of Peru (BCRP by its acronym in Spanish).

Why securitisation is the ideal mechanism (security for autonomous assets, feasibility of issuing participation certificates in favour of banks and the government)

Securitisation is an ideal mechanism for the guarantee programme because it allows ESFs to obtain greater immediate cash flow by being able to trade the certificates issued that are backed by the government.

Likewise, even though the financial entity granted the loan portfolio in a pass-through capacity, it will continue to be in charge of collecting payments from the loans and the companies that have obtained the loans from the ESFs, under the terms and conditions agreed upon.

COFIDE’s involvement and regulatory changes that allow it to be a trustee

Given that the SMV is the authorised regulator for securitisation companies, by means of Superintendent’s Resolution No 00041-2020-SMV/02, provisions were approved so that COFIDE may act as a securitisation company in the guarantee programme of Reactiva Perú and in the National Government’s Guarantee Programme for the Credit Portfolio of the Companies of the Financial System under Legislative Decree No 1508.

Future Market Trends: What To Expect

Securitisations to restructure debts

Companies have been using securitisation structures to improve the management of their liabilities. A good example is that of a group of Peruvian schools that in October of 2020 placed a second issue of social bonds through a private offering under its First Securitised Bond Programme for an amount of USD17 million and a term of 15 years, thereby redeeming and cancelling securitisation bonds that were outstanding and issued in 2014.

It is worth highlighting the particularity of this case because it was not only a securitisation process but also a securitisation process with the issuance of thematic (social) bonds certified by an independent verifier, which has been increasing in the local market in recent years.

Securitisation for Peruvian Housing Development Bank (Fondo MIVIVIENDA)

There is an initiative to develop a secondary market for low-income housing by the Peruvian Housing Development Bank (Fondo MIVIVIENDA) loans.  In the Peruvian market, securitisation trusts can help provide cash flow to Fondo MIVIVIENDA, as local regulation offers legal instruments to bolster the secondary trade of mortgages. At the present time, the housing market faces a lack of liquidity.

Securitisation for small to medium-sized enterprises (SMEs)

In the Peruvian market, securitisation trusts can help provide cash flow to SMEs, as local regulation does not limit their use to only originator companies with large-scale assets. The current lack of liquidity of local companies and the increased risk aversion of banks create an ideal space for SMEs to seek new financing schemes that allow them to obtain liquidity in the short term.

PNISC 2022–2025 public–private securitisation trust

The PNISC 2022–2025 incorporates a sustainability approach, with the Peruvian government actively promoting inclusive and sustainable development of infrastructure. This plan is designed to serve as a catalyst for economic growth, enhance competitiveness, address disparities, and to allow the implementation of infrastructure projects. Additionally, it aims to provide widespread access to public services, ultimately improving the quality of life for citizens and placing them at the core of the State’s priorities.

Prioritising 72 projects with a total investment of PEN146 billion, the PNISC 2022–2025 spans key sectors such as transportation, communications, water and sanitation, energy, oil and gas, environment, production, agribusiness, education, and health.

In line with these objectives, President Dina Boluarte announced, on 28 July 2023, the creation of the first public–private securitisation trust. This pioneering structure aims to allow the execution of PNISC 2022–2025 projects without jeopardising Peru’s fiscal stability.