Perhaps the most notable recent dollar-denominated European deal came from underwriters Citibank and Salomon Smith Barney, which arranged the first global vendor finance securitization outside of the U.S. for French telecoms equipment manufacturer Alcatel.

The transaction was structured using a Citibank-managed, Delaware-based trust called Securitized Vendor Finance 1999-A, which has purchased a portfolio of loans made by Alcatel to finance its customer purchases. At present, the trust can buy up to $500 million worth of such loans, although Alcatel expects this to grow to $1 billion over the next year.

The pooling of the loans, combined with their diversity and credit enhancement, allowed for a higher rating than if the loans were sold individually. Alcatel retained exposure to the first 30% of any losses.

"The off-balance sheet sale of longer term loan assets improves corporate liquidity and frees up capital for other productive uses," said Jean-Pierre Halbron, Alcatel's chief financial officer.

Myron Glucksman, managing director of global securitization at Citibank, said that now 30% of Alcatel's business is in the U.S. The collateral contains loans for wireless networks, satellite dishes, computer equipment, fiberoptics; anything that startup telephone and technology firms "need to compete with the Sisco Systems of the world." Glucksman estimates that manufacturers like Alcatel are loooking at "billions of dollars" in business for coming years. - Matthew Davies, SK

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