Following a sterile first quarter, cross-border future-flow deals from Latin America are coming back to life. Brazilian wood pulp producer Aracruz Celulose and Salvadoran bank Banco Salvadoreno have awarded mandates to veteran JPMorgan Securities and regional newcomer Wachovia Securities, respectively. Should favorable circumstances hold, neither deal is expected to take very long.

Sized at US$150 million, the Aracruz transaction will come off a program through vehicle Arcel Finance Limited. The upcoming transaction will probably have a legal final maturity of seven years and an average life of five years. JPMorgan snatched the mandate in what was said to be a fierce contest. Fees were crunched as a result, according to a banker who lost the deal.

Aracruz last tapped Arcel for US$400 million in late July 2003 via Citigroup Global Markets. With a final maturity of eight years, that deal priced to yield 7.152%. Fitch Ratings, Standard & Poor's and Moody's Investors Service rated the transaction BBB', BBB-', and Baa3', respectively.

Collateral for that deal was comprised of current and future U.S. dollar receivables generated by exports of bleached eucalyptus kraft market pulp (BEKP). The company's single-minded focus on pulp has been a double-edged sword. While it ranks as the world's most efficient producer of the eucalyptus variety, Aracruz is intensely vulnerable to price swings.

Prior to last year's issue, Arcel drew US$250 million from a securitization program capped at US$1 billion. The company said in an email that the deal was planned for "mid-second quarter."

Salvadoreno hops from Merrill to Wachovia

Meanwhile, Banco Salvadoreno let a mandate with Merrill Lynch expire, handing the deal to Wachovia. Precise details on the transaction remain sketchy, but sources said it will be no more than a few tweaks from the structure as conceived with Merrill.

That deal was a US$100 million securitization of existing and future U.S. dollar-denominated diversified payment rights (DPRs). The size was US$100 million, and Fitch had rated it BBB', two notches above El Salvador.

Last year, only two Central American banks tapped the structured cross-border market. Banco Cuscatlan and Banco Agricola executed DPR transactions through Citigroup and Wachovia, respectively. Agricola marked Wachovia's entry into the Latin American securitization arena. As its second mandate, Salvadoreno might be pointing to niche strategy. "It's a good move for the bank," said one banker. "Though Central America is well-marketed, it's not as banked as Brazil."

On tenterhooks over Banespa/Santander

As of press time, a hotly anticipated mandate for a joint DPR deal between related banks Banespa and Banco Santander in Brazil had not been awarded. While the deal isn't expected to be overwhelmingly large, it will likely portend more to come. "It's a daily topic of conversation," said a banker. "It could be the beginning of a new program."

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