Calyon Securities has secured its first mandate in Latin American future flows, according to sources. The newcomer is leading a DPR deal for Brazil's Banco Itau. The projected size of the deal will be between $200 million and $500 million. Itau's last structured transaction was a $105 million, seven-year DPR issued in July 2003. Fitch Ratings and Standard & Poor's rated that deal triple-B, while Moody's Investors Service gave it a Baa1.' Merrill Lynch acted as lead.
Meanwhile, this year could produce a first out of Guatemala. Banco Industrial, the country's largest bank, has handed a mandate to Wachovia Securities for a transaction backed by DPRs, according to well-placed sources. Details have apparently not been worked out yet.
While this would be a debut DPR from Guatemala, the country has obliquely participated in a previous structure. El Salvador's Banco Cuscatlan, which launched a DPR program in September 2003, has tapped flows from Guatemala and other jurisdictions.
Wachovia entered the structured arena in Latin America with a DPR bond for Banco Agricola. The bank has also led a deal for Banco Salvadoreno. While both originators hail from El Salvador, Wachovia's Latin American structured team is understood to have ventured outside the Central America region in its non-public business.
Banco Industrial is the largest bank in Guatemala, with a network of 186 full-time branches, 84 kiosks, and 245 ATMs. The bank has a market share of 20% in terms of assets and 19% in terms of deposits. S&P gives the bank a counterparty credit rating of BB-' and a survivability assessment of BBB-'. The bank had assets of 19.9 billion quetzals ($2.57 billion) as of December 2004.
The bank's balance sheet is heavily dollarized - 40% of assets and liabilities are in US dollars - due to its trade finance activities. Established in 1968, the bank has traditionally focused on the corporate sector and high net-worth clients. Fitch rates Industrial BB-' on the foreign currency global scale, while Moody's gives it a foreign-currency deposit rating of Ba3.'
Turkey's Isbank set to price
Elsewhere in Emerging Markets, Turkiye Is Bankasi (Isbank) was set to price a $700 million, four-tranche deal at the end of last week, the second transaction backed by diversified payment rights from Turkey in a week. Pricing details had not emerged as of press time.
ABN AMRO and HSBC Securities jointly led the transaction. For the originator, White & Case was legal counsel on US law, while Derman Ortak Avukat Burosu provided domestic counsel. Advising the arrangers are Mayer Brown Rowe & Maw on the cross-border front and PEKIN & PEKIN for domestic law.
Collateral is comprised of the proceeds from all existing and future U.S. dollar-, euro-, and sterling-denominated payment orders received by Isbank from correspondent banks and payors. The correspondent banks that will be paying into the concentration account for the current transaction include the Bank of New York - also trustee - and American Express Bank, Citibank, N.A., Deutsche Bank and JPMorgan Chase, among others.
This deal brings Isbank's current program to $1.3 billion, having been preceded by a $600 million, three-tranche transaction that closed in mid November (see ASR 11/22/04). That deal featured wraps by Ambac and MBIA and included $100 million unwrapped tranche issued with an unusually long 10-year tenor.
In Turkey, Isbank is the largest private bank and runs the second-most branches. Excluding receivables generated inside the country, the originator's DPR business in US dollars, euros and sterling has swelled to $9.1 billion in 2004 from $3.6 billion in 2000, according to a report by S&P. Total unconsolidated assets equal to roughly $29 billion in local currency.
CSN to return this week
Returning to Latin America, Brazilian steelmaker Companhia Siderurgica Nacional is slated to price an export-backed bond May 31. Led by BNP Paribas, the deal will hoist the total amount of the company's issuance program to $579 million. At 10 years, the tenor is a couple of years longer than the $162 million export-backed deal the company issued in June. Proceeds from the deal will go in part to retire the roughly $78 million outstanding of a $125 million, export-backed, three-year bond floated in August of 2003, according to a company source. That deal was a floater and priced at 275 basis points over Libor.
The rest of the proceeds will be used for capital expenditures, the source added.
Both Fitch and S&P rate the upcoming transaction triple B-minus. Debt service coverage is projected to average 7.8 times quarterly, with a minimum 5.15 times quarterly coverage, according to an S&P report.
CSN is one of largest steel producers in Latin America, with a capacity to produce 5.8 million tons of crude steel annually, according to the company website. It runs a mill in the state of Rio de Janeiro that churns out "the continent's most complete range of flat steel," the website says. Apart from its core business of steelmaking, CSN operates upstream businesses in mining and has stakes in two rail networks, among other interests.
The company posted a net profit of R$717 million ($298 million) in 1Q 2005, up 115% from the 1Q 2004. In 2004, Companhia Siderurgica reported production of 5.5 million metric tons - its highest ever. Heavy demand from China and strong growth at home has been feeding into the company's bottom line. In a recent presentation to investors the company said it expects China's appetite to hold up. "Despite huge capacity increases, China will continue to be net importer of high value-added products," the company said, forecasting that foreign markets will consume 25% of the 5.3 million metric tons projected for this year.
Following a very quiet first quarter, cross-border issuance is expected to pick up. "Some issuers are looking at low-interest refinancing," said one market source. Recent volatility in the plain corporate credit markets may also start to steer issuers towards securitization, he added.
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