Brazil's first contract-backed cross-border securitization - and the first Brazilian securitization of existing onshore assets to be rated above the sovereign ceiling - was placed at the end of August.

The privately placed $80 million deal comes from MSF Holding, a Latin American medical equipment finance company, and was structured by Deutsche Bank Alex Brown, which also sold the deal along with Credit Suisse First Boston. It is backed by dollar-denominated leases of medical machinery such as ultrasound devices and scanners and loans to finance similar equipment (ASRI 8/14/2000 p1 and 12/31/1999 p1).

While the deal may boast several firsts, it is unlikely to be the last such deal from MSF, which is majority owned by a U.S. company called DVI, itself a frequent issuer of securitizations.

Michael O'Hanlon, president of DVI said the deal established a "funding platform" that would make possible further deals. "DVI hopes to use this approach again as we further expand our position as the leading financier for health care equipment in Latin America," he said.

The transaction, which comes via a SPV called MSF Funding, is also the first capital markets transaction to be insured by the Multilateral Investment Guarantee Agency, a World Bank affiliate. The policy covers protects against transfer restrictions and the expropriations of the issuer's Brazilian bank account, though it does not offer protection against devaluation.

The insurance, combined with 35% subordination on the senior tranche, allows the rating agencies to rate the deal above Brazil's sovereign ceiling, with Moody's Investors Service rating the $52 million senior chunk at A2 and Standard & Poor's and Fitch rating it at A. It priced at 275 basis points over Treasuries. The $5.6 million B piece was rated Baa2/BBB and priced at 375 over, while the $6.4 million C chunk was rated Ba3/BB and priced at 700 over. All three tranches have 2.27-year average lives and a September 2004 final maturity.

The deal included two further tranches, a $4 million D tranche rated B by S&P and Fitch, but not rated by Moody's, and an unrated $12 million piece. Both have 2.3-year average lives and September 2004 finals.

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