Citibank Peru is working on the country's first "Brady-stripping" deal. The transaction, up to $100 million in size, will consist of zero-coupon bonds, which could have up to a 17-year term and will be backed by the interest rate flow from the Brady bonds.

"What we are doing is taking the Brady bonds and striping them into longer and shorter maturities," explained Alberto Carrera, a banker with Citibank Peru. "By doing that we are widening our investor base because different investors are looking for different tenors. We will also be providing added value to investors who are otherwise reluctant to buy Brady bonds because of the price risk involved."

Issuing bonds out of an SPV was a matter of obligation rather than choice for Citibank. "Ideally, we would have liked to sell the Brady bonds directly," said Carrera. "But because of certain restrictions imposed by the Peruvian law we had to issue bonds backed by the Bradys from an SPV."

Citibank is also working on a fourth tranche of securitized bonds for Ferreyros S.A., an independent distributor of imported equipment and trucks. The $20 million deal backed by equipment loans is expected to hit the local market by the end of this year.

"This tranche is a little different from the previous three," said Carrera. "The equipment loans have a very short average life and many investors expressed an interest in longer maturities so this time around we introduced a revolving structure into the deal."

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