Spain recently saw its first public, term CLO deal, when its second largest bank, Banco Bilbao Vizcaya Argentaria (BBVA), launched a e1.15 billion ($1.11 billion) issue backed by corporate loans.

The deal, called BBVA-1, priced at wider spreads than anticipated, highlighting the new willingness of Spanish originators to offer premiums to entice foreign investors and internationalize the placement of Spanish issues (ASRI 2/28/2000 p1).

BBVA-1 was split into five tranches and was managed by BBVA and Goldman Sachs. The 3.7-year average life senior tranche, worth e928.4 million, was priced at three-month Euribor plus 30 basis points.

Both Standard & Poor's and Fitch IBCA rated the senior tranche at AAA. Pricing for the other tranches, which all have average lives of 6.75 years, ranges from three-month Euribor plus 39.5 basis points to three-month Euribor plus 225. S&P and Fitch awarded ratings ranging from AA/AA+ for the second most senior tranche to BB for the lowest.

An official at BBVA confirmed that the spread on the senior tranche was wider than the bank had hoped for, but said: "BBVA does not have the same name recognition in the international market as it has with Spanish investors, so it was necessary to offer a premium."

The official added that because of the high concentration of the underlying portfolio with large corporates in a limited number of business sectors, investors were also looking for higher spreads. The underlying assets were made up of 53 loans to 42 obligors, mostly Spanish (87% of the total), with the rest coming from Denmark, Sweden, Portugal, Germany and the Czech Republic.

The bonds were sold mainly with bank investors in Spain, the Benelux countries, France, Germany and London.

Meanwhile, Madrid-based securitization fund Titulizacion de Activos (TDA) closed its own first CLO deal last week. EBN Banco and Credit Agricole Indosuez acted as co-managers on the e474.4 million ($456.9 million) issue, which was backed by over 7000 small business loans originated by six national and regional banks.

The deal, split into two tranches, was unusual in that the e379.5 million senior tranche carries a full government guarantee. This is part of a state program to encourage banks to lend to small- and medium-sized firms by providing state guarantees for securitizations of those loans, which were largely financed by the government-funding program Instituto de Credito Oficial.

Because of the sovereign guarantee, pricing for the senior piece (rated AAA by Fitch) was far tighter than usual, at two basis points over six month Euribor. The AAA rating comes from the deal's underlying AA rating, the guarantee from AA-rated Spain, a subordinated line of credit and a reserve fund.

The e94.9 million tranche, rated AA, did not carry a state guarantee and was priced at 30 basis points over six month Euribor. The bonds both had 2.5-year average lives and were sold across Europe, said a TDA official.

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