Following the victory of Fernando de la Rua in Argentina's presidential election, the local market has gained momentum, at least for a while. The president elect's most popular campaign slogan, "one dollar equals one peso", which stands for maintaining the economic policy that pegs the local currency to the dollar, is credited as they key factor in his successful campaign and is likely to encourage issuers to the asset-backed market.
"This next six weeks are a window of opportunity for issuers," said Juan Pablo de Mollein, an analyst with Standard & Poor's in Buenos Aires. "Now that the elections and some of the uncertainties that surrounded them are over, issuers who had deals ready for launching are going to try and take advantage of the Indian Summer' before the Y2K issue arises. Otherwise, the deals will have to wait to next year."
One such issuer is the province of San Juan, which is getting ready to launch a $145 million future flow transaction managed by J.P. Morgan The proceeds from the deal will be used for the construction Los Caracoles Punta Negra, a hydroelectric complex, as well as for the exploitation and maintenance of another hydroelectric facility called Quebrada de Ullum.
The province will deposit 7.39% of its co-participation tax revenues due from the federal government into a trust in order to pay investors. For further enhancement, the transaction has a full guarantee from the Argentinean government. In case of default, the government will consider the notes part of its foreign debt obligations.
"Given this full financial guarantee from the government, we felt comfortable assigning the transaction a triple-A credit rating," said Mollein.
Citibank Brings Three
Citibank is bringing three bond repackaging deals to the local market. Its local subsidiary, Citicorp Capital Markets S.A., is ready to launch the offerings of up to $200 million backed by public bonds issued by the Argentine Republic. The notes are rated triple-A by Standard & Poor's, equal to the sovereign's local credit rating.
Each transaction features a different bond. One will be backed by the Global 17 notes which have an 11.375% coupon and an 18-year final maturity, another offering will be backed by the Global 27 notes which have a 9.75% coupon and a 28-year final maturity and the third deal will be backed by the Bontes 04 notes, which feature a 11.25% coupon and mature in 2004. All the bonds will matched pari passu with the structured notes.
The offering, which was tailor-made for local pension funds, will offer the same interest rate payments as the original bonds issued by the government plus an additional 1%.
"Though Citicorp said it will issue up to $200 million in each transaction, rumor has it that they will only issue $75 million from each and save the rest for next year," said a source familiar with the offering.
Bansud's First ABS
Meanwhile, Banco Bansud S.A. is in the market with Fideicomiso Financiero Multiactivos 2000 Serie Prendas 1, its $50 million securitization of auto loans. The transaction is divided into three tranches: a $41 million tranche rated triple-A in the local scale with a three-year maturity, a $4.9 million tranche rated triple-B and a $2.4 million piece rated double-B.
The deal is the bank's first asset-backed offering and, depending on its success, more will follow. "I believe they will be able to sell $50 million, the question is at what price," said a market pro who has been following the transaction. "On the one hand it's their first ABS deal; on the other, the assets are of very high quality and the market is pretty receptive at the moment."