Undeterred by dismal consumer demand, Chile's BCI Securitizadora brought the country's first credit card securitization to market in early November. "The collateral backing the deal is super-healthy," said Gerardo Spoerer, CEO of the structuring bank, "particularly since they're accounts with a proven track record."

Named after the deal's department-store originator, Ripley totaled Ps66 billion (US$95.1 million), with Ps40.5 billion (US$58.3 million) allocated to a senior piece and Ps25.5 billion (US$36.8 million) to a subordinated one. The senior tranche priced at 7.3%, yielding a spread of roughly 158 basis points over a combination of the Central Bank's PCB bonds maturing in two and five years. The expected maturity of the A piece is mid-2005, while the legal final is late 2008.

Moody's Investors Service affiliate Humphreys and Standard & Poor's affiliate Feller Rate gave the transaction a triple-A on the national scale.

Ripley's denomination sets it apart from other deals. With only a few exceptions, all domestic bonds issued over the last couple of years have been denominated in inflation-indexed units (UF), while Ripley carries a nominal denomination to match the fixed-rate yielding collateral. That helped draw some unconventional investors into the card deal, according to Spoerer. "There were mutual funds hungry for nominal paper," he said, adding that they were looking to offset the lower returns during those months in which the UF is actually negative or virtually flat. Pension funds, banks and two insurance companies bought into the deal as well.

Apart from the 38.6% enhancement from the subordinated piece, the transaction's safe rating was bolstered by a 24% discount factor used to purchase the receivables, a Ps2.86 billion (US$4.1 million) cash reserve, and the quality of the private label credit card accounts comprising the collateral.

Still, some investors whiffed too much sector risk, particularly for a yield that tight. "The price wasn't good for us and I just don't see it being easy to generate assets with the consumption sector as depressed as it is," said one insurance company official.

Internal demand - which depends largely on consumption - fell in constant prices from the same periods of 2000 and 2001. Retail sales inched up a negligible 0.4% in the January-October time frame. Many Chileans are terrified of taking on debt following traumatic periods of sky-high interest rates when the emerging world was engulfed in the Asian crisis.

Spoerer said that Ripley's credit-card sales have bucked the downturn so far and will probably continue to outperform consumption in general. "[The card's] growth amid such a steep contraction is an additional guarantee," he said.

Ripley is a mid-market department store that has recently made inroads into Santiago's more posh neighborhoods. A variety of shops accept its credit card, though Ripley itself accounts for the lion's share of charged purchases.

BCI plans to swipe through a second credit card securitization in less than three weeks. That deal will be a harder sale than Ripley, given the double-A national scale rating from Feller Rate and Fitch Ratings on its Ps15.25 billion (US$22.0 million) senior tranche. The entire transaction amounts to Ps25 billion (US$36.0 million).

Elsewhere in Santiago's structured finance market, Securitizadora Bice is readying a 2.77 million UF (US$66.5 million) bond backed by mortgages and housing leases. Feller Rate and Humphreys have rated the deal double-A on the national scale, according to a source close to the deal. Banco de Desarrollo is the originator. Bice plans to strike before year end.

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