Synthetic structures treaded beyond the usual CDO and MBS sectors last week, as the first consumer synthetic transaction was marketed to European investors.

Etoile 2002-1 B.V., originated by Paris-based Banque OBC, a unit of ABN AMRO, is in the market with a EURO200 million synthetic securitization of consumer loans. The deal is structured in two tranches of floating-rate notes rated triple-A at the Class A level and triple-B-plus at the Class B level. Both tranches carry a four-year average life.

The collateral backing the notes consists of cash or a portfolio of securities issued by the central governments of Europe rated double- A and Pfandbriefe rated triple-A. The risk of the portfolio will be transferred through a credit default swap between Banque OBC and Etoile 2002-1. The issuer will then be placed in a cash deposit account and will be used to purchase Euro-denominated government bonds.

According to Standard & Poor's, Bank OBC is using the synthetic issue as a means to achieve regulatory capital relief by transferring to the capital markets the credit risk associated with a portfolio of loans to private clients.

And this evolution of synthetics beyond CDO and MBS transactions is the logical progression for the European market, market participants said. According to Moody's Investors Service, banks are increasingly looking to synthetics as a method of securitizing their exposure to risk in the aircraft industry, as a way to score regulatory capital relief.

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