Guatemala made its first foray into future flows Sept. 9, when Banco Industrial priced a two tranche, $200 million deal backed by diversified payments rights (DPRs). Wachovia Securities was sole lead on the transaction, which broke down into a $125 million, seven-year final wrapped piece and a $75 million, five-year final unwrapped tranche. The former, insured by XLCA, priced at 32 basis points over three-month Libor, while the latter priced at 145 basis points over. Fitch Ratings, Moody's Investors Service, and Standard & Poor's rated the unwrapped piece BBB', Baa2,' and BBB-', respectively. The wrapped piece was, of course, triple-A all around.

The unwrapped piece was added only in the final stages before launch, according to a source close to the deal. Wachovia bankers apparently did so to discern whether there was any appetite. There was, and investors from the triple-B world in the U.S. and abroad bought in. Providing counsel for Wachovia was Dewey Ballantine for international law and Rodriguez Archila Castellanos Solares & Aguilar for domestic law. The respective advisors to Industrial were Mayer, Brown, Rowe & Maw and Mayora & Mayora.

Industrial is Guatemala's largest bank, holding 20% of the country's total banking assets in 2004. The bank's DPR business raked in roughly $2.9 billion in 2004, up from $1.8 billion in 2003, according to a Fitch report. Flows in the first half of 2005 totaled $1.47 billion. Originating mostly in the US, this business is comprised of payments on exports, family remittances, capital flows and relief payments.

Paper-based remittances will make up a substantive share of the securitized flows, a departure from the typical DPR deal, which is backed overwhelmingly by electronic flows. This peculiarity reflects Industrial's heavier reliance on paper-based transactions than its peers in other Central American countries, Brazil and Turkey: the three regions where the busiest DPR issuers reside. In the first half of 2005, for instance, the Guatemalan bank's paper DPR flows reached $602 million, 41% of the total.

While Wachovia has yet to arrange a public deal in emerging-market structured finance outside of Central America - the bank premiered as an EM arranger only two years ago with a DPR transaction for El Salvador's Banco Agricola - the talk is that they are looking farther afield for opportunities. Wachovia's international structured finance team has already arranged a private deal out of Asia, according to a source familiar with the sector. The interest in branching out reportedly includes domestic assets, which, in markets like Mexico, have become fertile ground for both established local investment bankers and relative newcomers like Credit Suisse First Boston and Merrill Lynch.

One of Guatemala's neighbors is busy in the market as well, with El Salvador's Banco Cuscatlan timed to potentially issue a DPR-backed deal via Citigroup Capital Markets this week, according to a source familiar with the transaction. Wrapped by Ambac, the deal might advance a novelty the originator introduced in September 2003: bundling assets from more than one country into a single deal. That time the originator brought in flows from units in Guatemala and Costa Rica and even the U.S. This time, Cuscatlan might fold Panamanian and Honduran branches into the mix, according to the source.

Cuscatlan issued a seven-year $50 million DPR transaction in June of 2004. Led by ING, that transaction was rated triple-B by Fitch and S&P. It marked the third transaction off a DPR program, bringing total issuance to $275 million.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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