SECURITIZATION TRANSACTIONS

9 Months Ended

Sep. 30, 2024

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 card receivables 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 these 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 these 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 September 30, 2024:

SPEs

Collateralized debt
(In millions)

Interest rate

Currency

Maturity

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

202

CDI + 2.50%

Brazilian Reais

March 2027

Mercado Crédito Fundo de Investimento Em Direitos Creditórios Não Padronizado

CDI + 3.50%

Brazilian Reais

August 2025

Olimpia Fundo de Investimento Em Direitos Creditórios

CDI + 1.25%

Brazilian Reais

November 2024

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

220

CDI + 2.35%

Brazilian Reais

January 2030

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

CDI + 5.25%

Brazilian Reais

July 2028

Seller Fundo De Investimento Em Direitos Creditórios

192

CDI + 1.60%

Brazilian Reais

March 2026

Seller Fundo De Investimento Em Direitos Creditórios

CDI + 1.80%

Brazilian Reais

May 2026

Seller Fundo De Investimento Em Direitos Creditórios

CDI + 1.40%

Brazilian Reais

September 2026

Seller Fundo De Investimento Em Direitos Creditórios

CDI + 1.60%

Brazilian Reais

November 2026

Seller II Fundo De Investimento Em Direitos Creditórios Segmento Meios De Pagamento De Rsponsabilidade Limitada

183

CDI + 0.85%

Brazilian Reais

July 2027

Mercado Crédito Consumo XXX

Badlar rates plus 200 basis points with a min 75% and a max 155%

Argentine Pesos

November 2024 - April 2025 (2)

Mercado Crédito Consumo XXXI

Badlar rates plus 200 basis points with a min 45% and a max 125%

Argentine Pesos

December 2024 - March 2025 (2)

Mercado Crédito Consumo XXXII

Badlar rates plus 200 basis points with a min 25% and a max 80%

Argentine Pesos

January 2025

Mercado Crédito Consumo XXXIII

Badlar rates plus 200 basis points with a min 5% and a max 60%

Argentine Pesos

March 2025 - April 2025 (2)

Mercado Crédito Consumo XXXIV

Badlar rates plus 200 basis points with a min 15% and a max 60%

Argentine Pesos

April 2025 - July 2025 (2)

SPEs

Collateralized debt
(In millions)

Interest rate

Currency

Maturity

Mercado Crédito Consumo XXXV

Badlar rates plus 200 basis points with a min 15% and a max 60%

Argentine Pesos

June 2025 - August 2025 (2)

Mercado Crédito XX

Badlar rates plus 200 basis points with a min 100% and a max 170%

Argentine Pesos

September 2024 - December 2024 (2)

Mercado Crédito XXI

Badlar rates plus 200 basis points with a min 45% and a max 125%

Argentine Pesos

January 2025 - March 2025 (2)

Mercado Crédito XXII

Badlar rates plus 200 basis points with a min 15% and a max 70%

Argentine Pesos

March 2025 - April 2025 (2)

Mercado Crédito XXIII

Badlar rates plus 200 basis points with a min 15% and a max 60%

Argentine Pesos

May 2025 - June 2025 (2)

Mercado Crédito XXIV

Badlar rates plus 200 basis points with a min 15% and a max 60%

Argentine Pesos

June 2025 - August 2025 (2)

Mercado Crédito XXV

Badlar rates plus 200 basis points with a min 15% and a max 60%

Argentine Pesos

July 2025 - August 2025 (2)

Mercado Crédito XXVI

Badlar rates plus 200 basis points with a min 15% and a max 60%

Argentine Pesos

August 2025 - October 2025 (2)

Mercado Crédito XXVII (1)

Badlar rates plus 200 basis points with a min 15% and a max 60%

Argentine Pesos

August 2025 - October 2025 (2)

Fideicomiso de administración y fuente de pago CIB/3756

214

The equilibrium interbank interest rate published by Banco de Mexico in the Diario Oficial plus 2.35%

Mexican Pesos

August 2026

Fideicomiso de administración y fuente de pago CIB/3369

The equilibrium interbank interest rate published by Banco de Mexico in the Diario Oficial plus 7.0%

Mexican Pesos

July 2027

Fideicomiso de administración y fuente de pago CIB/3369

231

The equilibrium interbank interest rate published by Banco de Mexico in the Diario Oficial plus 2.8%

Mexican Pesos

July 2027

Fideicomiso Irrevocable de Administración y Fuente de Pago número CIB/4372

The equilibrium interbank interest rate published by Banco de Mexico in the Diario Oficial plus 2.5%

Mexican Pesos

August 2027

1,845

(1) As of September 30, 2024, Loans payables owned by this trust were obtained through private placements. Mercado Crédito XXVII trust made a public bond offering in the Argentine stock market on October 7, 2024.

(2) Minimum and maximum maturity depending on the applicable interest rate within the range.

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 September 30, 2024 and December 31, 2023 as follows:


	September 30, 2024		December 31, 2023
Assets	(In millions)
Current assets:
Restricted cash and cash equivalents	$	480	$	355
Credit card receivables and other means of payments, net	32		105
Loans receivable, net of allowances	1,444		1,198
Total current assets	1,956		1,658
Non-current assets:
Long-term investments	19		23
Loans receivable, net of allowances	86		27
Total non-current assets	105		50
Total assets	$	2,061	$	1,708
Liabilities
Current liabilities:
Loans payable and other financial liabilities	$	390	$	693
Other liabilities	42		1
Total current liabilities	432		694
Non-current liabilities:
Loans payable and other financial liabilities	1,455		782
Total non-current liabilities	1,455		782
Total liabilities	$	1,887	$	1,476