Continuing its pioneering efforts to jump start the local ABS market, Argentina's largest bank, Banco de Galicia y Buenos Aires, recently closed the second securitization of credit card receivables for its subsidiary Tarjeta Naranja.

The $25 million deal, which mirrors one launched late last year, has a one-year maturity and a coupon of 11%. The receivables will revolve during an interest-only period of six months and then the deal will pay down in a six-month controlled amortization.

"We are extremely pleased with the results," said Daniel Seva, an official at Banco de Galicia y Buenos Aires. "Even though the local market is in the midst of a fierce recession and facing political uncertainty, we managed to achieved a lower coupon than the 12% rate paid by public bonds."

The first deal for Tarjeta Naranja, whose credit cards are targeted to lower and middle-income borrowers who would not usually apply for bank credit cards, was launched in November 1998. The initial offering of $25 million was increased to $50 million due to investor demand. It was Argentina's first revolving credit card deal.

The new deal received a local triple-A rating from Fitch IBCA and a local Argentine agency, Magister Thomson Bankwatch. Tarjeta Naranja enjoys widespread popularity in Argentina's provinces, where borrowers are more reluctant to apply for credit cards through banks.

With this target market, defaults on the loans tend to be higher than bank card loans. According to the bank, a 23% over-collateralization and the more than 100,000 credit accounts that back the transaction mitigate this risk.

Though the offering garnered investor interest for $37 million, Banco de Galicia decided not to increase the size of the $25 million deal this time. "We didn't want to create an excess of funds for the company," explained Seva. "We would rather keep the receivables for another securitization."

Another deal of a similar-size is expected in the local market by the end of the year.

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