latin america structured finance process

December 2016

Confidential

LATIN AMERICASTRUCTURED FINANCE ADVISORS LLC

An Emerging Market Absolute Return Credit Strategy,With A Focus On Latin American Structured Credit Securities

1LATIN AMERICA STRUCTURED FINANACE ADVISORS LLC

THIS IS NOT AN OFFERING OR THE SOLICITATION OF AN OFFER TO PURCHASE AN INTEREST IN LATIN AMERICA STRUCTUREDFINANCE ADVISORS, LLC (THE “COMPANY”). ANY SUCH OFFER OR SOLICITATION WILL ONLY BE MADE TO QUALIFIED INVESTORSBY MEANS OF A CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM AND ONLY IN THOSE JURISDICTIONS WHERE PERMITTED BYLAW. AN INVESTMENT IN THE COMPANY IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. OPPORTUNITIES FORWITHDRAWAL, REDEMPTION AND TRANSFERABILITY OF INTERESTS ARE RESTRICTED, SO INVESTORS MAY NOT HAVE ACCESS TOCAPITAL WHEN IT IS NEEDED. THERE IS NO SECONDARY MARKET FOR THE INTERESTS AND NONE IS EXPECTED TO DEVELOP. THEFEES AND EXPENSES CHARGED IN CONNECTION WITH THIS INVESTMENT MAY BE HIGHER THAN THE FEES AND EXPENSES OFOTHER INVESTMENT ALTERNATIVES AND MAY OFFSET PROFITS. NO ASSURANCE CAN BE GIVEN THAT THE COMPANY’S OBJECTIVEWILL BE ACHIEVED OR THAT AN INVESTOR WILL RECEIVE A RETURN OF ALL OR PART OF HIS OR HER INVESTMENT. THECOMPANY’S RESULTS MAY VARY SUBSTANTIALLY OVER ANY GIVEN TIME PERIOD.

This material contains certain forward-looking statements and projections regarding the future performance of the Company. These projections are includedfor illustrative purposes only. By their nature, forward-looking statements and projections are inherently predictive, speculative, and involve risk anduncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actualresults and developments to differ materially from those expressed or implied by these forward-looking statements and projections. No assurances can begiven that the forward-looking statements in this document will be realized. The Company does not intend to update these forward-looking statements. Theinformation contained herein regarding the Company is confidential and proprietary. By accepting this information, the recipient agrees that it will use theinformation only to evaluate its potential interest in the limited liability company interests described herein and for no other purpose and will not divulge anysuch information to any other party. This material and its contents are proprietary information of the Company and any reproduction of this information, inwhole or in part, without the prior written consent of the Company is prohibited.

The Company has obtained all information contained herein from public sources believed to be accurate and reliable. However, such information is presented“as is,” without warranty of any kind, whether express or implied. The Company makes no representation, express or implied, as to the accuracy, timeliness,or completeness of any such information. All expressions of opinion are subject to change without notice, and the Company does not intend to update theinformation contained herein. Results of certain comparative indexes and benchmarks are shown for informational purposes only. The Company’s investmentprogram does not mirror any index or benchmark shown and the volatility of the Company’s investment program may be materially different. All investmentsinvolve risk, including the loss of principal.

Disclosure


Latin America Structured FinanceOur Strengths give us our Competitive Advantage

Combined Parties Provide U.S. Level Due Diligence

Advanced Structuring Tools – We Engineer Profitability and Risk Exposure

Legal and Economic Interests of All Parties Aligned

Transparent Data Converted to Useful Information

Probability-based Risk Analysis and Economic Pricing versus Book Value Accrual Accounting

Processing Efficiency Allows Greater Diversification and Liquidity in US Dollars

Structured for Accredited Investors qualified to evaluate private securities – historic risk-adjusted returns average 13% to 14% US$.


Portfolio Management and Security Selection


Latin America Structured Finance Advisors and PartnersOur Strengths give us our Competitive Advantage

U.S. Level Due Diligence

Advanced Structuring Tools – We Engineer Profitability and Risk Exposure

Legal and Economic Interests of All Parties Aligned

Transparency Converted to Useful Data

Probability-based Risk Analysis and Economic Pricing versus Book Value Accrual Accounting

Processing Efficiency Allows Greater Diversification and Liquidity in US Dollars


Strong Brazilian PartnersOur Strengths give us our Competitive Advantage

Fifteen years of experience managing FIDCs

R$2.5 Billion under management, 82 Funds and 77 FIDCs

Average FIDC Size is R$34 million

Processing Efficiency Aids Risk Management

No failures because of fraud or poor management

Benford’s Law and Defaults

Loan-level data


Developed Market ToolsOur Strengths give us our Competitive Advantage

Fifteen years of experience managing FIDCs

R$2.5 Billion under management, 82 Funds and 77 FIDCs

Average FIDC Size is R$34 million

Processing Efficiency Aids Risk Management

No failures because of fraud or poor management

Benford’s Law and Defaults

Loan-level data


Superior StrategyHighly Diversified PortfoliosFIQ FIDC San Gabriel Strategy

FIDC Low RiskMany Small FIDCs

FIQ FIDC LASFA

Typical FIQ FIDC Strategy

FIDC High Risk

Specialized FIDC

FIQ FIDC X


Investment Process – Applying Best Practices to Find Value

Due Diligence and Fundamental Credit Analysis

• Evaluate deal manager’s experience

• Thorough on-site inspection

• Verify deal managers not tied to shell companies

• Check deal manager transaction history

• Disciplined underwriting and servicing

• Decision structure well defined

• Fully analyze the collateral performance – must meet risk/return objectives

No – Deal Rejected

Deal Accepted – Move to Quantitative Testing

Yes – Passes All Tests:

Complete Cash Flow

Model

Interest Rate Paths and Default Scenarios

• Structure provides return/risk payoffs that beat the hurdle rate in the worst case scenarios

• Structure Provides Better Payoffs than other opportunities

No – Deal Rejected Yes – Passes All Tests Go to Portfolio Risk

Evaluation

Build Waterfall

and Triggers

Model-Driven

Quantitative Analysis

We integrate fundamental credit research with quantitative credit tools to arrive at buy decisions


ReturnEngineer Database –Provides Updated Deal

Information

Interest Rate Scenarios

Performance Reports & Data to

Investors

Continuous Performance Surveillance – Models are the Best Forensic Tools

Delinquency Scenarios from Vector

Auto-regression Model

Step 1: Periodic Due Diligence

Quarterly visits to servicers to verify that underwriting and servicing standards are being maintained (Evaluation by US and Brazilian Representatives)

Step 2: Modeling

The model uses our proprietary database, daily loan-level updates, and arbitrage-free interest rate scenarios to provide up-to-date information and consistent prices for the assets relative to the investor tranches

Monitor Actual versus Model Performance

Rules-based Cash Flow Engine(Waterfall)

PricingScenario Analysis

Benchmarks & Risk/Return

Profile


Risk Management


Evaluate the collateral and due diligence

Study all of the documents: By-‐laws and prospectus

Set up proprietary cash flow model and collateral assumptions

Run stochastic analysis on the FIDC

Monitor: Use the model results as a performance benchmark

Risk Management – Portfolio Management Process


LASFA Monitoring Reports

Portfolio Credit Analysis – Measures the total value of late payments and the breakdown of late payments versus provisions for bad debt

Portfolio Liquidity – measures the cash on hand and the cash due in 30, 90, 180, and 360 days

Credit Term Structure – Maturity ladder for the portfolio

Overcollateralization – Breakdown of overcollateralization that we link with our probability-based projections to estimate probability of survival

Portfolio Sector Breakdown – Composition of the credit portfolio by credit type

Breakdown of Delinquent Credit into Aging Buckets – static and time series analysis

Statistical Tests for Numerical Validity

Risk Management – Risk Tools – Static Risk Reports


Brazil credit has been generating respectable returns after adjusting for defaults

Loan-level transparency with the big data tools to analyze exposures and provide meaningful information

Diversified portfolio of funds

Thorough due diligence process with the latest qualitative and quantitative models for managing risk

LASFA provides the tools to manage liquidity in US dollars and allows the Brazilian investment grow without liquidating the credit portfolio

Latin America Structured Finance Advisors SummaryModern Portfolio Management meets Inefficient and Unstructured Markets


Contact Details

Vernon H. Budinger, CFACEO

Latin America Structured Finance

[email protected]

710 S. Myrtle, #519, Monrovia, CA 91016

USA +1 626 664 9017

Brazil 5511 8674 7950

www.latamsfc.com

latin america structured finance process

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