Advent buys LatAm mortgage lender

Advent International has executed another buyout in the Latin American financial services space, acquiring Mexico-based mortgage lending outfit Hipotecaria Casa Mexicana (HCM). Terms of the deal were not disclosed.

The mid-size players have been taking a very aggressive approach to lending in the last few years; much riskier than we could feel comfortable with. Santiago Castillo, principal, Advent International

The acquisition of HCM follows a period in which the firm has been actively shopping for mortgage lenders in the Mexican market. The Boston-based group has looked at a number of opportunities within the space, but ultimately pulled the trigger on HCM because it was the first mortgage lender the firm considered that didn’t carry too much risk in its portfolio.

“We detected that there would be a housing boom [in Mexico] a few years ago, so we started looking at opportunities in the space.” Advent principal Santiago Castillo told PEO. “The mid-size players have been taking a very aggressive approach to lending in the last few years; much riskier than we could feel comfortable with…Critical mass and size do matter, but we felt it was more intelligent to acquire a smaller player and pursue growth through acquisitions or possibly a merger.”

HCM is still a relatively nascent group within Mexico’s mortgage lending space. The company was founded in 2002, and its primary business is in mortgage lending for single-family homes and providing bridge loans to developers for the construction of housing projects. HCM targets the low- to middle-income segment of the market, a niche that Castillo said attracted Advent to the deal. HCM has experienced an increase of 218 percent in its net income over the past three years.

Advent would not disclose the purchase price of the transaction, although Castillo indicated the firm, along with its co-investors, has earmarked $50 million of equity dedicated to the investment. Advent has also tapped industry veterans José Madariaga and Pedro Rodríguez Sierra as co-investors in the deal.

HCM’s founder Jaime Corredor will stay with the company as chairman, while the investors have brought in industry vet José Yanes as the new CEO.

The investment is coming out of Advent’s $265 million, 2002-vintage Latin American Private Equity Fund II, and Advent will look to co-invest in this deal using its third Latin American investment vehicle, which has not yet been raised.

HCM was advised on the deal by Pablo Rión y Asociados, a Mexico-based investment banking firm.

Advent has been an active player in the Latin American financial services space in the past. In September, the firm acquired Nuevo Banco Comercial SA in a privatization of Uruguay’s largest commercial bank. Other deals include investments in Mexican currency exchange services provider Consultoría Internacional and electronic money transfer outfit DolEx Dollar Express, which was sold in 2003.