Feb 1, 2009

Afores have in recent years been flush with cash to spend on long-term investments. Restrictions on where they can put it, however, have limited their options and often diverted funds from projects.

Yucatan-based grower Agropecuaria Santa Genoveva (AGSA) developed a groundbreaking wood-revenue securitization structure in order to raise 1.65 billion pesos from the Afores in July, winning it the LatinFinance award for Best Financial Innovation.AGSA, a subsidiary of Grupo Empresarial Guerra, had been looking for more than four years to tap pension funds to support its production of teak wood, a specialty material used in products including outdoor furniture. The 18-year life cycle of the teak tree makes it a great candidate for long-term investment, explains Pablo Acedo, CFO at Cotemsa, a sister company which handles the Guerra group’s finances and structured the AGSA transaction.The resulting deal was a 2028 bond that pays holders not a coupon or yield, but 40% of the revenue from future teak wood sales. About 400 million pesos in proceeds have been used...

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