For some time, there had been talk that when the easy money of the last several years dried up, Brazil's leading banks would return to structured finance. The reasoning was that harsher terms for unsecured funding would enhance the appeal of collateralizing diversified payment rights (DPRs).

With two Brazilian banks closing DPR deals in as many weeks, that shift might be happening.

Banco do Brasil recently closed a $250 million deal backed by diversified payment rights (DPRs), breaking a four-year silence in the securitization market. The transaction has a six-year legal final maturity and a five-year average life. Assured Guaranty provided a wrap, garnering the deal a triple-A from both Moody's Investors Service and Standard & Poor's. The underlying ratings were A1' and BBB+', respectively. BNP Paribas led the deal.

Pricing came to 55 basis points over three-month Libor. Details on the investor book were unavailable.

Curiously, the spread was only five basis points tight to an unwrapped Brazilian DPR deal that Banco Bradesco closed last week, according to sources and news reports. The 60-basis-point spread over Libor achieved by Bradesco's $500 million, variable funding notes aroused suspicion that the transaction didn't go to market investors. An official at Bradesco didn't return calls or an e-mail requesting comment. The transaction only had a single rating, an A-' from S&P. Bank of Tokyo-Mitsubishi led the deal.

Apart from Unibanco, Bradesco was the only Brazilian bank active last year in DPR-backed issuance. The originator placed a $400 million deal in December and a $500 million one in June.

Sources said that more DPR transactions were in the works. With opportunities evaporating on other fronts, structured finance players in emerging markets are busy courting Brazilian banks for cross-border issuance.

A recent S&P report said that DPR proceeds could meet Brazilian banks' funding requirements at home. For exporters, however, the agency didn't foresee a return to the securitization market. There still isn't any incentive for these originators to securitize given that commodity prices remain remarkably high.

(c) 2008 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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