A recent 10-year transaction by Banco do Brasil augurs well for longer-dated unwrapped Brazilian bank deals, sources said.

Despite talk that lead manager Deutsche Bank was initially having trouble getting a chunk of the paper off its book at the 6.55% pricing, players said the US$250 million deal proved appetite is there for maturities beyond the standard seven-year. "It's a sign of confidence in these institutions," said a market source active in the sector.

Backed by diversified payment rights (DPR), the transaction was the second unwrapped deal this year out of Brazil to pierce seven years, on the heels of a 25 billion (US$234 million) deal by Unibanco last month. Moody's Investors Service and Standard & Poor's rated the Banco do Brasil paper Baa1' and BBB-,' respectively. Banco do Brasil's London branch BB Securities co-managed the deal. Cross-border legal counsel for the originator was Linklaters; for the underwriters it was Dewey Ballantine. Pinheiro Neto provided counsel on the domestic side. Closing was Dec. 19, 2003. The last time Banco do Brasil hit the 10-year curve was in 1997.

One rating analyst said the credit strength of a typical DPR deal from a tested Brazilian bank would change little from seven to 10 years. "I don't think there's been any resistance from the rating agencies," he added. Issuers themselves kept the lid on maturities out of pricing concern, but the results of Unibanco and Banco do Brasil might coax their banking peers to seek longer maturities. Exporters may follow suit as well, though only the top tier need apply. "Except for the very big names, it'll be a tough sale," said a market source.

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