Two Argentine commodity-related deals are in the pipeline for February, but activity has yet to meet the high expectations kindled last year by the combination of a massive currency devaluation and shortage of financing alternatives. Some players thought exporters would come to the structured market in droves. As it turned out, merely a handful of deals materialized. The volume tracked by ASR hit US$42 million.

"The sector didn't quite take flight the way we thought it would," said Lucas Brady, a senior lawyer at Alchouron, Berisso, Brady Alet & Fernandez Pelayo. "The boom in this product never came."

While a weak currency incited securitization players to court producers in the export market - chiefly in commodities - the reality has turned out to be more complicated, particularly in transactions with a large number of participants. "These deals need to be put together slowly and with some difficulty," said Cesar Tortorella, the president of Garantizar, an agency that structures and insures deals for small to medium-sized companies. Despite the obstacles, Garantizar has been periodically issuing deals under its Secupyme program.

Others have pulled out. An ambitious program launched by state-owned bank Banco de Inversion y Comercio Exterior (BICE) at the end of 2002 was abandoned late last year when a critical mass of small producers could not be reached. As a result, Standard & Poor's recently withdrew its rating on the US$25.6 million transaction, structured as a CLO. The bank eventually decided to ditch efforts to securitize the loans, as credit lines that were previously closed to the bank opened up again, said a source close to the deal. The bank had been fielding originators from the gamut of exporting sectors and more than 130 firms were slated to participate. Diversification had been one of the deal's selling points.

The case of BICE not only illustrates the difficulties in bringing together an unwieldy group of originators, but the irrelevance of structuring such transactions when other sources of funding materialize.

Meanwhile, Secupyme is timed to yield its fifth and sixth series in February. Structured and insured by Garantizar, both series will bring together dozens of small exporters. Series V will benefit soy, bean and corn farmers and reach a volume of US$3 million. Lead Banco de Valores is aiming for a pricing of 5% to 6% on the 300-day paper. Series VI will raise funds for pear and apple producers and be sized in the ballpark of US$3 million.

While denominated in U.S. dollars, the target audience is comprised of Argentine institutional investors.

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