Over the last year, European underwriters have been overshadowed by their U.S. peers in the shrunken market of cross-border securitizations out of Latin America. Domestically, the picture is different. Across Latin America, banks from the Old World have no reason to envy the Street or even local banks for that matter. What follows is a snapshot of what European banks have recently been up to in the major markets of the region.

In Argentina, it comes as no surprise that a number of European players have partially or fully withdrawn from the country, following the sweeping pesification of foreign currency debt and massive defaults. In addition, the domestic market has offered little in the way of liquidity for the last year.

Still there are two European banks in particular that have kept the industry alive. ABN Amro has acted as trustee on a number of transactions used to facilitate the takeover of collapsing banks amid the crisis (see ASR 1/27, p. 21). There is also speculation that the bank is pulling together a securitization to finance exports, which would involve an offshore trust component and be targeted to local investors.

Since the crisis exploded, HSBC has been involved in one way or another in most of the export-related deals that have punctuated the otherwise dead calm of the peso market. The London-based bank issued a securitization of loans to agricultural producers on Nov. 27 (see ASR 12/09 p.18). More recently, HSBC, along with BBVA Banco Frances and Santander Central Hispano-owned Banco Rio de la Plata, structured and provided the collateral for a six-month, US$15 million transaction that closed Feb. 21 (see ASR 3/10 p. 20).

Brazil and Colombia

Locals dominate Brazil's domestic securitization industry. About the only European bank to make any noise in that market is Santander, which issued a R$45 million (US$13 million) deal backed by a leasing agreement involving food giant Nestle (see ASR 2/3, p. 35). The bank has another real-estate receivable deal in the works, sized at R$100 million (US$29 million).

Recent European activity in Colombia's securitization industry is also confined to Santander. The Spanish bank floated a Ps138 billion (US$47 million) mortgage bond for local bank Colpatria in two separate issues, partially guaranteed by the Inter-American Development Bank (see ASR 2/10, p.25). As in Brazil, locals hold sway in domestic securitizations, which tend to cover agricultural assets.

Chile

While a handful of European banks underwrite deals in Chile's general bond market, there are only two active in securitizations, ABN Amro and Santander. The Dutch bank dove into the sector in mid-2001, when it acquired the securitization arm of Banc of America as part of the latter bank's sweeping withdrawal from the region. ABN inherited an MBS originated by BBVA as part of the purchase and placed that deal - its first securitization - in September 2001. To date, it has placed three bonds, all in the housing sector.

Talk is that the bank is now working on a securitization of future college tuition, with Universidad Diego Portales as originator. That transaction is sized at 1 million inflation-indexed units or UF (US$23 million) and termed at eight years. The International Finance Corporation is providing a partial guaranty. All three agencies are rating the deal, heard at double-A minus on the national scale.

Santander, for its part, is the securitizer with the largest volume of deals under its belt, according to sources. To date, the Spanish bank has structured and placed 10.5 million UF (US$238 million) of securitizations. Among its more noteworthy achievements, Santander issued the first cross-currency securitization of Chilean global bonds in early 2002 and placed paper backed by government payment for public-works earlier this year (see ASR 2/10, p.22).

Mexico

The Mexican domestic market has been the belle of the Latin American ball for the last several months and three firmly established European-owned banks - Deutsche, BBVA Bancomer and Santander - have been among the hosts of the party.

Granted an investment-banking license in mid-2000, Deutsche has matured into a player of the housing sector. According to sources, the Mexico City office enjoys support from the team in New York, which has been gearing up in U.S. MBS. To date, the bank has done three securitizations in the housing sector. The last was a seven-year, Ps672-million (US$62 million) transaction backed by bridge loans for construction and rated triple-A on the national scale by all three international ratings agencies. The deal floated last October.

Right now the bank is building a master trust for mortgage-backed securities, which have yet to surface. The trust will probably be sized at around Ps5 billion (US$461 million). Housing agency Sociedad Hipotecaria Federal handed Deutsche the mandate, along with co-lead IXE Casa de Bolsa, sources said.

BBVA developed its investment-banking capacity in Mexico in 1998 and became a formidable player in August 2000, with the acquisition of Bancomer, one of the largest banks in Mexico. To date, the bank has issued several bonds backed by one or two corporate loans. The most recent was a Ps500 million (US$46 million), three-year backed by corporate loans to two subsidiaries of Mexican conglomerate Group Carso (see ASR 3/3 p. 1).

The bank has edged into infrastructure as well. In early February, BBVA Bancomer closed a Ps700 million (US$65 million) securitization of revenues from the Veracruz-Cardel toll road (see ASR 2/17 p.19). Up ahead is another toll road deal that sources say holds a wrap from MBIA, the first time the international insurer is guaranteeing a domestic Mexican transaction. The bank is getting busy on the waterfront as well. Heard in the works is a Ps275 million securitization of water fees for sewage treatment plant Ecocys, operating a concession in the city of Leon.

Like BBVA, Santander bulked up its Mexico operations through acquisition, swallowing up Banco Mexicano and then the Serfin brokerage. The Spanish bank has recently come on strong in the area of municipal and state securitizations, trying to edge into a sector associated by many with Accival, which is part of Citigroup. The most noteworthy deal to come from the bank over the last few months is a novel securitization of payroll taxes by the State of Mexico. That Ps2 billion program closed March 13 with a Ps285 million issue. The bank has also placed toll road securitizations.

ING Barings is heard talking to originators in the housing sector, but the bank has been absent from the domestic market as a structuring or placement agent at least since mid last year.

Other European players in the market are guarantors. Dutch Development bank FMO provided a 7.2% guarantee for a Ps500 million (US$46 million), seven-year deal for housing lender Credito y Casa. There is talk that Belgium's Dexia Credit is supplying a partial credit guaranty to a small domestic securitization in the housing sector being structured by local financial consultancy Protego Asesores.

Cross-Border

Chastened by the Argentine crisis and Brazilian elections, European banks have not been particularly aggressive in cross-border Latin American securitizations over much of the last year. The traditionally stronger presence of a handful of U.S. banks has also kept them sidelined. However, a few European banks have pushed through deals and are expected to stay alive in the sector.

Right before the Brazilian elections closed the market down to virtually all Latin issuers, ING Barings made a US$40 million private placement backed by electronic money transfers for Brazil's Banco do Brasil. ING had co-led a prior bond for BdB in June.

Earlier last year, Barclays Capital placed a two-tranche deal totaling US$140 million for El Salvador's Banco Agricola.

ABN Amro is currently heard with a mandates for a Brazilian electronic money transfer securitization and, along with Merrill Lynch, for Brazilian exporter VCP. The bank has been building up its cross-border Brazilian business and plans to strike once the war jitters calm, sources said.

Copyright 2003 Thomson Media Inc. All Rights Reserved.

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