A pay-TV unit of Brazilian publishing powerhouse Editora Abril is looking to tap a new audience. The latest issuer to tune into FIDCs - the nation's most popular investment vehicle - TVA has an R$120 million (US$43 million) program in the works. Collateral is by and large comprised of future accounts receivables linked to 170,000 TVA customers, located in the state of Sao Paulo. A fledgling structure in Brazil, FIDCs combine features of an investment fund and traditional SPV. Local rating agency Austin Asis has rated the deal AA' on the national scale.

Because the underlying assets have yet to be generated, the TVA FIDC carries a performance bond by UBF Garantias y Seguros, the first time a surety has been attached to this vehicle, according to sources. "It provides a better structure for investors," said Francisco Turra, a partner at Integral Trust, which cobbled together the deal.

The scope of a performance bond is more limited than a total wrap. In the case of this transaction, it covers the performance of TVA under the agreements with the customers included in the pool. Its debut in the FIDC world doesn't mean that the wraps that are a common sight in cross-border circles will make their way into Brazil's domestic market. "It's difficult to find the insurance capacity for this kind of guaranty in Brazil," said UBF Director Luis Barretto.

Brazil's securities regulator, the CVM, requires special approval for uninsured transactions of future flows, known locally as "unperformed" receivables. "If you have the guaranty, you can simply register and start selling shares," Barretto said. An issuer with a future flow transaction that has no surety must make its case before the CVM and wait for the nod. Another transaction in the works has chosen that route (see Copesul below). Copesul and TVA are the first pair of future flow FIDCs to come out.

UBF was formed in January 1999 through the merger of surety providers Compania Seguradora Brasileira de Fiancas and Cia. United de Seguros. Swiss Re and Enhance Financial Services each have a 45% stake in the Brazilian insurance company. Rio Bravo Investimentos holds the other 10%.

Mellon Brascan DTVM is acting as administrator and distributor for the closed-end fund, which has an expected life of two years and a legal final maturity of four. Some US$60 million in shares is slated for launch later this month, according to Turra. The other US$60 million will be issued in the second half of the year. The target yield is 115% of the benchmark CDI rate.

Turra said that only customers in Sao Paulo were selected for the pool because their income is, on average, higher than customers from other states. TVA is one of Brazil's leading cable companies.

Early last year, Integral Trust structured the first FIDC to close. Turra left his post as president of the Brazilian unit of CIT Group to form the consultancy two years ago.

Elsewhere in this animated market, petrochemical player Companhia Petroquimica do Sul (Copesul) has a R$150 million (US$53 million) FIDC on the front burner. Banco Votorantim is the structurer and its asset management arm will manage the closed-ended fund. The target yield is 106.5% of CDI, according to a prospectus on the deal. Fitch Atlantic Ratings has rated the senior shares of the deal AA-(bra)' on the national scale. An unrated subordinated tranche accounts for R$25 million (US$8.9 million) of the volume. Monthly payments kick in after a grace period of eight months.

Backing the fund are existing and future trade receivables. The pool of clients eligible for the existing receivables number about forty and have exhibited a delinquency rate of under 1% in the past. The future receivables will come off long-term contracts with two second-generation petrochemical companies, Petroquimica Triunfo and DSM Elatomeros Brasil. The former is a joint venture between Petrobras, Dow Quimica and Petroplastics, while the latter is a unit of DSM from the Netherlands. Petrosul churns out basic petrochemical products and thermoplastics.

Meanwhile, activity has quieted down on the cross-border front, but talk is percolating of a return of Petrobras to the market with a long-term deal, perhaps as far out as 30 years. Iron ore producer Companhia Vale do Rio Doce (CVRD) priced a 30-year unsecured bond Jan. 9, and market sources say Petrobras might want to shoot that far as well. But the question remains as to whether the oil giant would issue a securitization or go plain vanilla like CVRD. Petrobras last visited the structured arena in the second quarter of last year, with a US$750, two-tranche securiziation of fuel oil and bunker oil receivables. The longer maturity on that deal was 12 years.


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