Securitisation in Peru: An Introduction

The securitisation market in Peru has experienced significant growth in recent years, with a notable increase in the number of securitisation trusts over the past decade, reaching approximately 600. Although this figure cannot be fully validated due to the private placement nature of many securitisation bonds, it provides an indication of the market's growth, particularly among non-bank securitisation companies – entities that do not belong to an economic group with a banking institution. These companies conduct a higher number of transactions, albeit on a smaller scale.

A large part of the growth in asset securitisation operations, securitisation trusts and the amount of securities issued through these structures stems from their use in financing public infrastructure, contributing to closing Peru’s infrastructure gap. In addition, securitisation trusts are increasingly used to finance real estate projects. Notably, there has been a rise in the securitisation of credit portfolios, with fintech companies leveraging these structures to obtain funding for loans, factoring and other operations.

Securitisation processes under Peruvian law

Under Peruvian law, securitisation is the process of establishing a special-purpose vehicle to support the payment of rights conferred to holders of securities issued against it. Securitisation involves transferring assets to the special-purpose vehicle and issuing the corresponding securities.

Beyond fulfilling its primary objective, the special-purpose vehicle may also guarantee other obligations contracted with financial entities or multilateral organisations, subject to limits set by the Superintendency of the Securities Market (the securities market regulator).

Securitisation can be carried out through trust estates, securitisation trusts or special-purpose entities. In practice, however, nearly all securitisation processes are conducted through securitisation trusts, governed by the Securities Market Law (Ley del Mercado de Valores) and the Regulations on Asset Securitisation Processes (Reglamento de los Procesos de Titulización de Activos).

Securitisation for financing public infrastructure projects

While not a novel use, securitisation has long been employed to finance infrastructure projects, particularly co-financed public-private partnerships. In recent months, local governments have used securitisation to obtain funding for infrastructure projects. In addition, recent legislation has permitted public entities to participate in securitisation processes to finance transportation and urban mobility infrastructure.

Securitisation trust of the Metropolitan Municipality of Lima (MML)

In December 2023, the MML conducted an innovative asset securitisation operation. This transaction involved a securitisation trust established by the MML, which issued an initial private placement of securitisation bonds for PEN1.205 billion over a 20-year term, as part of a bond issuance programme with a cap amount of PEN4 billion. This first issuance aimed to finance 42 infrastructure and public service projects in Lima and to repay existing debt.

In September 2024, a “reopening” (amendment of the first bond issuance) allowed the securitisation trust to issue an additional PEN1.25 billion in the capital markets, specifically to finance nine infrastructure and public service projects.

This issuance sets a milestone in the Peruvian capital market as the largest issuance in local currency in 2023 and the first time a Peruvian local government issued securitisation bonds internationally using an asset securitisation structure. Because the bonds were issued by the trust and not directly by the MML, the debt does not qualify as external indebtedness under applicable budget rules for local governments.

Finally, the structure also enabled the MML to issue bonds denominated in local currency (soles), while still allowing access to a much larger universe of investors by being an internationally placed bond.

The use of a securitisation trust offers several advantages:

• it ensures that the resources transferred to the securitisation trust for the issuance of securities (property transfer tax and vehicle tax) are “isolated” within a purpose-specific vehicle, designated exclusively to secure the payment of the securities issued by the securitisation trust, without being subject to diversion or repurposing by this or other municipal administrations;
• it is managed by a professional administrator (a securitisation company), which is also a supervised entity (and chartered by the Peruvian securities regulator), providing security and transparency in its operations;
• it allows for the diversification of financing sources, reducing dependence on traditional bank loans or central government transfers (a particularly useful feature in the context of budgetary constraints); and
• it enables access to immediate financing, allowing for upfront monetisation of future revenue streams.

Lastly, this type of structure is attractive to institutional investors (such as insurers, pension funds, etc), which are often highly interested in asset-backed instruments that can offer stable returns and maturities aligned with their long-term investment needs.

The experience gained from this transaction demonstrates the potential of an asset securitisation structure for local governments or other governmental entities to obtain financing for infrastructure development projects, backed by future tax revenues or any other stable cash flows they may receive.

Securitisation Trust for the Development of Transportation and Urban Mobility in Lima and Callao

In December 2023, the government issued Legislative Decree No 1613, which created the Securitisation Trust for the Development of Transportation and Urban Mobility in Lima and Callao. This regulation authorised the Urban Transportation Authority for Lima and Callao (ATU) to transfer – as trustor (originator) – liquid resources, assets and/or rights in fiduciary ownership to a securitisation company for the establishment of the Securitisation Trust for the Development of Transportation and Urban Mobility in Lima and Callao.

The purpose of this securitisation trust is to obtain loans and financial resources for the development of transportation and urban mobility infrastructure projects in Lima and Callao. According to the regulation, these projects can be executed under the modality of State-to-State Contracts or procurement systems governed by the National Supply System, the National System for the Promotion of Private Investment, or Works for Taxes, provided they comply with the provisions of the Legislative Decree.

Through this regulation, the assets contributed to the trust (payments made by ATU, revenues from future fare collections and other resources allocated to ATU) are protected, to ensure they are used exclusively for the repayment and guarantee of securities issued by the securitisation trust. The Legislative Decree also allows the securitisation trust to contract loans and credit lines, in addition to issuing securities.

Finally, and importantly, the operations carried out by the securitisation trust fall outside the scope of the National Public Debt System and do not constitute public debt. This is because the debtor of the securities (or, where applicable, loans and credit lines) is not the public entity (ATU) but the securitisation trust.

Once again, we see how a securitisation trust can be used by public entities as an efficient financial tool to mobilise resources for high-impact projects, ensuring proper fund management and protecting contributed assets. This mechanism attracts private financing by disconnecting the debt incurred from the public entities' balance sheets and channelling it directly toward specific projects, ensuring transparency and efficiency in execution.

In the case of transportation and urban mobility in Lima and Callao, this scheme facilitates the implementation of large infrastructure projects without compromising public debt, which is particularly advantageous in a context of fiscal constraints. In addition, the ability to issue securities, contract loans and access credit lines provides financial flexibility to the trust, allowing it to adapt to each project's needs and market conditions.

This model also encourages private sector participation by offering instruments backed by tangible assets and predictable revenue streams, thereby increasing investor confidence. Ultimately, the use of securitisation trusts in the public sector opens the door to new forms of public-private collaboration, driving the development of critical infrastructure in a sustainable and efficient manner.

This strategy could set a significant precedent for future infrastructure investments in the country and the region, showcasing a viable form of collaboration between the public and private sectors. Moreover, the successful implementation of this model could accelerate the development of key infrastructure, positively impacting urban mobility, safety and quality of life in Lima and Callao.

Securitisation trusts for real estate development

The securitisation trust has been widely used for the development of various real estate projects and, in recent years, for financing land acquisition (landbanking), particularly in areas of urban expansion in Lima and other provinces of Peru.

Trusts for real estate projects

It is said that securitisation trusts for real estate projects “boomed” in 2024, and this trend is expected to continue in the coming year. Much of this growth can be attributed to the emergence of various investment funds (many of them established through private offerings) that are willing to invest specifically in securitisation bonds.

Thus, throughout 2024, investment funds and other institutional investors acquired bonds or participation certificates in securitisation trusts for real estate projects, injecting significant dynamism into real estate projects and their financing methods. As a result, the use of securitisation trusts in the real estate sector has contributed to expediting project timelines, allowing developers to secure financing more quickly.

Securitisation Trust for Real Estate Income Investment – FIBRA

In 2016, the Regulations on Asset Securitisation Processes were amended to promote the creation of securitisation trusts that exclusively issue participation certificates through primary public offerings, aimed at acquiring or constructing real estate for leasing or other forms of profitable use. This type of trust is referred to as a “Securitisation Trust for Real Estate Income Investment – FIBRA”.

The Regulations on Asset Securitisation Processes were amended again in 2019 to encourage the development of FIBRAs and improve the functioning of the asset securitisation industry. Notable changes included updates to the constitutive act, obligations of securitisation companies, information required in the prospectus, and procedures for registering programmes and securities, among others. Requirements were also introduced for a securitisation trust to maintain FIBRA status, including its organisational structure, functions and the issuance and placement of participation certificates.

Therefore, the history of FIBRAs in Peru as an investment vehicle for acquiring and/or developing real estate for leasing or other income-generating purposes is relatively recent.

Securitisation trusts for landbanking

The concept of landbanking, understood as the strategic acquisition and accumulation of land for future development, has gained prominence as a key tool in the real estate and infrastructure sectors. In this context, securitisation trusts are being used to structure and finance such initiatives, enabling real estate developers (and investors) to maximise asset value and ensure the sustainability of their projects.

In Peru, securitisation trusts for landbanking have been employed to acquire land in urban expansion areas in Lima and in other regions of the country.

Securitisation of credit portfolios

Securitisation trusts continue to be a key tool in financial markets to transform credit portfolios into tradable financial instruments, offering significant advantages to the transferring entity (particularly financial system companies).

This technique, traditionally used by banks and other financial institutions, is evolving to incorporate new players such as fintech companies, which are leveraging its flexibility to innovate financing models.

Transfer of credit portfolios to securitisation trusts by financial system companies

For financial system companies, transferring credit portfolios to securitisation trusts is a well-established practice that allows these institutions to convert assets into liquid resources. Through this structure, financial entities transfer a portfolio of credits (such as mortgages, consumer loans or vehicle loans) to a trust, which subsequently issues securities backed by the income flows of that portfolio.

Currently, various banking institutions and microfinance organisations use securitisation trusts as a mechanism to transfer credit portfolios to a special-purpose trust. Securities issued from this trust are then offered (via public or private offerings) to a range of investors.

This mechanism enables financial system companies to improve liquidity, diversify risk (by limiting exposure to the credit risk associated with the securitised portfolio) and optimise regulatory capital. By removing the assets from their balance sheets, these companies enhance capital ratios and meet other regulatory requirements more effectively.

Increased participation of fintech in securitisation processes

Fintech companies are playing an increasingly significant role in Peru's financial market, with one of their main areas of innovation being securitisation processes. These companies – particularly those operating in lending and factoring verticals – are using securitisation to structure their asset portfolios and offer attractive financial instruments to investors. This approach allows fintechs to enhance their access to funding, diversify risk and increase operational liquidity.

For companies in the lending vertical, many fintechs use securitisation trusts to secure funding from investors, optimising their business model and ensuring growth. This structure provides lending-focused fintechs with greater liquidity within a highly specialised financing framework.

In the case of factoring platforms, the securitisation of commercial invoices has become a key tool for quickly monetising income flows. This model also benefits investors, who gain access to instruments backed by tangible assets with competitive returns. Furthermore, the growing interest in alternative financing is driving fintechs to explore new ways to structure securitised instruments, including consumer credit portfolios and other recurring income flows.