Last week Unibanco became the second Brazilian bank this year to issue a deal backed by diversified payment rights (DPR). And, like its predecessor, Banco do Brasil, the choice was to go unwrapped. "They felt that the right sentiment was there," said a source close to the transaction. With capacity constraints among monolines and fears of a Brazilian default fading fast, the bank probably did not face a difficult decision on its MT-100, as DPR deals are known.

Dresdner Kleinwort Wasser- stein led the two-tranche deal, sized at US$225 million in total. Debevoise & Plimpton counseled the arranger, while Dewey Ballantine advised investors.

The transaction was a private placement 144A/Reg S. Unibanco was looking for a good allocation in Europe, hence its selection of Dresdner. "The mandate came on the back of a lead order," a source said. Distribution was split more or less evenly between European and U.S. investors. The transaction has a six-year legal final maturity and an average life of 3.71 years.

A floating rate piece of US$120 million yielded 425 basis points over three-month Libor. Sized at US$105 million, the 6.15% fixed-rate tranche priced at par.

Moody's Investors Service, Standard & Poor's and Fitch Ratings gave the deal Baa1'/'BBB-'/'BBB', respectively. The issue comes off the same program as a US$400 million deal placed in May of 2002. That transaction carried a wrap from MBIA.

Collateral for the deal is comprised of rights to all dollar-denominated payment orders remitted to Unibanco by certain foreign correspondent banks: Bank of America, Citibank, Deutsche Bank Trust Company Americas, JPMorgan Chase Bank and the Bank of New York. Combined, these banks have accounted for at least 75% of payments in the recent past, according to a source. Trade-related transactions make up for the bulk of the DPR.

With US$21 billion in assets, Unibanco is the third largest private bank in Brazil. By the same indicator, its market share totaled 5.7% as of December 2002.

Aracruz rears head

Other Brazilian issuers are in the pipeline as well. Apart from a deal for steelmaker Acominas (see ASR 6/16, p.27), iron ore producer Companhia Siderurgica Nacional (CSN) is heard in the market with a receivables securitization of at least US$200 million via BNP Paribas, and CVRD is still planning a deal via JPMorgan. Pulp producer Aracruz may not be far behind. According to Brazilian newspaper Valor Economico, the company is mulling a deal sized at US$200 million. A company source declined to comment on this particular item, but she said a transaction might come to light in early August.

Aracruz is the largest manufacturer of bleached pulp from eucalyptus. The company ships more than 90% of its sales abroad, making it a natural visitor to the dollar market.

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