Securitization Transactions

3 Months Ended

Mar. 31, 2023

Securitization Transactions [Abstract]

The process of securitization consists of the issuance of securities collateralized by a pool of assets through a special purpose entity (“SPEs”), often under a VIE.

The Company securitizes financial assets associated with its credit cards and loans receivable portfolio. The Company’s securitization transactions typically involve the legal transfer of financial assets to bankruptcy remote SPEs. The Company generally retains economic interests in the collateralized securitization transactions, which are retained in the form of subordinated interests. For accounting purposes, the Company is generally precluded from recording the transfers of assets in securitization transactions as sales or is required to consolidate the SPE.

The Company securitizes certain credit card receivables related to users’ purchases through Chilean SPEs. Under the SPE contracts, the Company has determined that it has no obligation to absorb losses or the right to receive benefits of the SPEs that could be significant because it does not retain any equity certificate of participation or subordinated interest in the SPEs. As the Company does not control the vehicles, its assets, liabilities and related results are not consolidated in the Company’s financial statements.

Additionally, the Company securitizes certain credit card receivables related to users’ purchases through Brazilian SPEs. Under the SPE contracts, the Company has determined that it has the obligation to absorb losses or the right to receive benefits of the SPEs that could be significant because it retains subordinated interest in the SPEs. As the Company controls the vehicles, the assets, liabilities and related results are consolidated in its financial statements.

The Company securitizes certain loans receivable through Brazilian, Argentine and Mexican SPEs, formed to securitize loans receivable provided by the Company to its users or purchased from financial institutions that grant loans to the Company’s users through Mercado Pago. According to the SPE contracts, the Company has determined that it has both the power to direct the activities of the entity that most significantly impact the entity’s performance and the obligation to absorb losses or the right to receive benefits of the entity that could be significant because it retains the equity certificates of participation and would therefore also be consolidated. When the Company controls the vehicle, it accounts for the securitization transactions as if they were secured financing and therefore the assets, liabilities and related results are consolidated in its financial statements.

The following table summarizes the Company’s collateralized debt under securitization transactions, as of March 31, 2023:

SPEs

Collateralized debt as of March 31, 2023

Interest rate

Currency

Maturity

Mercado Crédito I Brasil Fundo de Investimento Em Direitos Creditórios Não Padronizados

198

CDI + 2.50%

Brazilian Reais

June 2025

Fundo de Investimento Em DireitosCreditórios Arandu

198

CDI + 1.75%

Brazilian Reais

June 2023

Mercado Crédito Fundo de Investimento Em Direitos Creditórios Não Padronizado

CDI + 3.50%

Brazilian Reais

August 2023

Olimpia Fundo de Investimento Em Direitos Creditórios

103

CDI + 1.25%

Brazilian Reais

November 2024

Mercado Crédito II Brasil Fundo De Investimento Em Direitos Creditórios Nao Padronizados

222

CDI + 1.90%

Brazilian Reais

April 2028

Mercado Crédito Consumo IX

Badlar rates plus 200 basis points with a min 30% and a max 52%

Argentine Pesos

May 2023

Mercado Crédito Consumo X

Badlar rates plus 200 basis points with a min 35% and a max 62%

Argentine Pesos

June 2023

Mercado Crédito Consumo XI

Badlar rates plus 200 basis points with a min 35% and a max 63%

Argentine Pesos

August 2023

Mercado Crédito Consumo XII

Badlar rates plus 200 basis points with a min 35% and a max 70%

Argentine Pesos

September 2023

Mercado Crédito Consumo XIII

Badlar rates plus 200 basis points with a min 35% and a max 74%

Argentine Pesos

November 2023

Mercado Crédito Consumo XIV

Badlar rates plus 200 basis points with a min 35% and a max 80%

Argentine Pesos

October 2023

Mercado Crédito Consumo XV

Badlar rates plus 200 basis points with a min 35% and a max 92%

Argentine Pesos

October 2023

Mercado Crédito Consumo XVI

Badlar rates plus 200 basis points with a min 60% and a max 92%

Argentine Pesos

December 2023

Mercado Crédito Consumo XVII

Badlar rates plus 200 basis points with a min 60% and a max 92%

Argentine Pesos

January 2024

Mercado Crédito Consumo XVIII

Badlar rates plus 200 basis points with a min 60% and a max 92%

Argentine Pesos

January 2024

Mercado Crédito Consumo XIX (*)

Badlar rates plus 200 basis points with a min 60% and a max 92%

Argentine Pesos

February 2024

Mercado Crédito XIV

Badlar rates plus 200 basis points with a min 30% and a max 48%

Argentine Pesos

April 2023

Mercado Crédito XV

Badlar rates plus 200 basis points with a min 30% and a max 56%

Argentine Pesos

August 2023

Mercado Crédito XVI

Badlar rates plus 200 basis points with a min 35% and a max 80%

Argentine Pesos

September 2023

Mercado Crédito XVII

Badlar rates plus 200 basis points with a min 35% and a max 88%

Argentine Pesos

March 2024

Mercado Crédito XVIII

Badlar rates plus 200 basis points with a min 35% and a max 92%

Argentine Pesos

January 2024

Fideicomiso de administración y fuente de pago CIB/3756

166

The equilibrium interbank interest rate published by Banco de Mexico in the Diario Oficial plus 1.90%

Mexican Pesos

September 2024

Fideicomiso de administración y fuente de pago CIB/3369

226

The equilibrium interbank interest rate published by Banco de Mexico in the Diario Oficial plus 3.0%

Mexican Pesos

April 2025

1,296

(*)As of March 31, 2023, Loans payable owned by these trusts were obtained through private placements. Mercado Crédito Consumo XIX trust made a public bond offering in the Argentine stock market on April 13, 2023.

This secured debt is issued by the SPEs and includes collateralized securities used to fund the Company’s Fintech business. The third-party investors in the securitization transactions have legal recourse only to the assets securing the debt and do not have recourse to the Company. Additionally, the cash flows generated by the SPEs are restricted to the payment of amounts due to third-party investors, but the Company retains the right to residual cash flows.

The assets and liabilities of the SPEs are included in the Company’s unaudited interim condensed consolidated financial statements as of March 31, 2023 and December 31, 2022 as follows:


	March 31, 2023		December 31, 2022
Assets	(In millions)
Current assets:
Restricted cash and cash equivalents	$	610	$	459
Short-term investments	1		—
Credit card receivables and other means of payments, net	231		317
Loans receivable, net	890		799
Total current assets	1,732		1,575
Non-current assets:
Long-term investments	21		21
Loans receivable, net	19		24
Total non-current assets	40		45
Total assets	$	1,772	$	1,620
Liabilities
Current liabilities:
Accounts payable and accrued expenses	$	1	$	4
Loans payable and other financial liabilities	723		535
Other liabilities	5		1
Total current liabilities	729		540
Non-current liabilities:
Loans payable and other financial liabilities	573		703
Total non-current liabilities	573		703
Total liabilities	$	1,302	$	1,243