ProCredit Bank Bulgaria (PCB) securitized part of its loan portfolio estimated at 100 million ($128 million). The transaction is a cash flow securitization of euro-denominated loans granted by PCB to small and medium sized (SME) Bulgarian enterprises.
PCB's 80 million note facility, rated BBB' by Fitch Ratings has been privately placed with one investor. Deutsche Bank managed the transaction.
The purpose of the deal is to provide more long-term financing, which will be chiefly used for lending programs for small and medium-sized companies. PCB bank is part of a network of 10 banks in southeastern Europe established by international financial institutions aiming to push growth in private sector SMEs within the region.
Markus Morlok, an associate director at Fitch, said that Bulgaria's securitization legislation is more developed compared to other jurisdictions in Central Europe. "The insolvency law in place is favorable to execute a securitization," he explained. "For example, it covers Fitch's criteria in terms of bankruptcy remoteness of a special purpose vehicle and allows the transfer of assets. We were able to rate this deal as we would other securitization deals."
The structure had additional support from guarantees provided by the European Investment Fund and German state sponsored bank Kreditanstalt fuer Wiedersbau (KfW). However, Morlok said that Fitch's ratings on the deal were applied before the wrap.
Increasingly, banks from Eastern European countries are tuning into the benefits of securitization. Morlok said that banks are looking at securitization as a funding or capital relief tool. "The securitization market in Bulgaria will not boom in the near-term; however, in the long-term, we should see more transactions emerge from the region," he said.
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