For those who've had enough Turkey (see story p.19), the EEMEA region will soon offer fresh alternatives. Egyptian General Petroleum Corp. is prepping to join the future-flow big leagues, while Kazkommertsbank from Kazakhstan and Vneshtorgbank from Russia have awarded mandates for deals backed by diversified payment rights (DPRs), according to sources.

Egyptian General Petroleum was heard to be roadshowing last week a partly wrapped $1.55 billion deal backed by forward sales of crude oil and naphtha, making it one of the largest future flow deals ever. BNP Paribas, Merrill Lynch and Morgan Stanley are joint bookrunners, with Morgan also acting as global coordinator and structuring adviser, sources said.

In an apparent effort to dole a substantial chunk of the deal to Gulf investors, National Bank of Egypt, HC Securities, EFG-Hermes, and Banque Misr are helping with distribution.

The transaction is split into $500 million of A-1 notes, $250 million of A-2 notes, and $800 million of A-3 notes. The A-1 and A-3 tranches have a final maturity of six years and an expected average life of 3.57 years. MBIA wraps the former tranche, while the latter comes unwrapped and is rated Baa1' and BBB' by Moody's Investors Service and Standard & Poor's, respectively. XL Capital Assurance is covering the Class A-2 notes, which have a final maturity of five years and average life of 2.79 years.

This deal is Egypt's second foray into the public cross-border securitization market, according to a source close to the transaction. The first was a nine-year, $250 million transaction by Banque Misr, with credit card receivables as collateral. Led by WestLB, that deal closed in 2002.

Supporting the unwrapped rating on the Egyptian General Petroleum deal is a performance risk and a bankruptcy risk consistent with a credit strength that is two notches above the sovereign's BB+' foreign currency rating, according to S&P. The agency noted that under Egyptian law the energy company "cannot become insolvent or be filed into bankruptcy without prior change to the law establishing Egyptian General Petroleum's status." The producer is wholly owned by the state. S&P also underscored the importance of an offtake and price hedge provided by Morgan Stanley Capital Group, which has agreed to purchase all the required shipping crude oil and naphtha products from the issuer, setting a price floor for both products.

In its report on the deal, Moody's noted that a variety of oil products can be delivered under the structure and that those products enjoy a "large and established export market."

On the downside, Moody's said the hedge from Morgan was imperfect.

Both agencies pointed out that interference from the sovereign is a danger, even though it is strongly mitigated by the structure of the deal, the damage such intervention would inflict on the government's reputation, and the company's importance to the national economy.

The structure will trap some 5% of Egyptian General Petroleum's estimated crude production and 27% of Naphtha production.

Meanwhile, Kazkommertsbank (KKB) has mandated WestLB and JPMorgan Securities to arrange a transaction backed by diversified payment rights (DPR), according to a source familiar with the bank. There is no word yet on size or tenor.

Moody's has rated an unsecured bond offering from KKB an investment grade Baa2', a single notch above the country's sovereign rating. S&P, meanwhile, rates the same paper BB-'. One source familiar with the bank said a securitization would enable KKB to access a different class of investor, as both agencies would likely rate a structured transaction investment grade. Also, ratings considerations aren't the only factor in an EM issuer's decision to securitize, said one source. "They may just want to diversify funding sources," he added.

Another EEMEA bank working on a DPR is Russia's Vneshtorgbank (VTB), which has awarded a mandate to Dresdner Kleinwort Wasserstein and Deutsche Bank Securities to structure a deal, according to a source. The second-largest bank in Russia, VTB is state-owned and had total assets of $17.8 billion at the end of 2004.

The VTB deal would mark Russia's inaugural push into DPRs and the country's second deal in financial future flows, after Rosbank's credit-card backed transactions.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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