Latin America

Brazil - Standard & Poor's Ratings Services said it has created a new model, developed in-house, to rate private sector transactions using transfer and convertibility risk (T&C) insurance, in emerging markets.

T&C insurance policies became available to capital market transactions in 1999. Among transactions using T&C insurance that have been completed are Argentina's TGN, which was an unsecured corporate issuance and Brazil based MSF Funding, which securitized medical equipment leases.

Argentina - In a cry for help in a time of political and economic chaos, Argentina is seeking a financial aid package and the International Monetary Fund (IMF), the World Bank, and the Inter-American Development Bank (IDB) are coming to the rescue.

The package, which came about as a rumor almost two weeks ago, sent a tremor of fear through the country. Spreads widened as people absorbed and processed the realization of the true state of the country. However, now some believe that financial aid just might be what the doctor ordered.


SNS Bank securitized approximately EURO 680 million worth of Dutch residential mortgages through Hermes II BV.

The transaction was lead-managed by UBS Warburg. The bank launched a similar deal in October of last year, and this is a repeat transaction. Hermes II was divided in two tranches: the EURO621 million triple-A tranche (Moody's/Fitch), with an expected average life of six years, was launched at three-month Euribor plus 27 basis points; the EURO28 million B tranche, with a 9.8 average life, was rated single A1/A and priced at three-month Euribor plus 80 basis points; and the EURO16 million tranche was retained by the issuer.

Italy - Media group Cecchi Gori's L465 million ($231 million) transaction, called Finance for an Italian Library of Movies (Films), has finally had its BBB-minus rating withdrawn by Fitch, following the consistent failure of the company to provide the ratings agency with timely and accurate performance information.

The Films deal, arranged by Merrill Lynch, came to market in February 1998 and is backed by revenues from Cecchi Gori's own film library. In November 1999, it became apparent that the company had missed two rental payments to the SPV. On top of that, the overcollateralization level required as credit support by Fitch had fallen below the stipulated 1.56%.

U.K. - Two significant proposals have recently been published that may affect spreads in the Sterling securitization market. Firstly, Paul Myners, Chairman of Gartmore International, made public his recommendations in relation to the Minimum Funding Requirement (MFR) in a letter addressed to the Treasury and the Department of Social Security (DSS). Secondly, and perhaps more importantly, the UK Accounting Standards Board informally approved Financial Reporting Exposure Draft 20 (FRED 20).

U.K. - The Ford Motor Co. recently came to market with the third auto-loans deal from its Globaldrive program, but the first to be backed by U.K. receivables.

Called Globaldrive U.K., the GBP250 million ($356.8 million) transaction securitizes around 72,000 loans with an outstanding value roughly equivalent to the bonds issued. Barclays Capital acted as lead manager on the transaction with Chase Manhattan, Morgan Stanley Dean Witter and Merrill Lynch brought in as co-leads.


Japan - In what has been a quiet fortnight on the Asian securitization market, Japanese consumer finance company Hitachi Shinpan tested the waters with a deal backed by consumer loans.

Called HABS Corp., Series 2000-1, this was the first public deal in its asset class to use a master trust structure using Japanese Trust Law. The structure allows for additional receivables to be added to the pool for this deal as well as making it possible for Hitachi to issue future deals from the same vehicle.

Korea - Merrill Lynch spin-off Merrill Lynch Global Emerging Partners recently announced that it has bought a 9.5% interest in Korea's secondary mortgage company, the Korea Mortgage Corporation (Komoco). Merrill's investment cost Krw10 billion ($8.8 million), half of which went to buying 4.75% of the International Finance Corp.'s - the World Bank affiliate - 15% share. The remaining stake came from the issue of new shares.

Hong Kong - Dutch investment bank ABN Amro will soon bring to market a deal backed by mortgages originated by its Hong Kong office. Called HK Synthetic MBS Co., the HK$1260.8 million ($161.65 million) transaction is structured as a synthetic collateralized loan obligation that is credit linked to the mortgages, whereby default risk is transferred from the bank's balance sheet to the special purpose vehicle.

The underlying portfolio is made up of almost 1200 first-tier residential mortgage loans with an outstanding balance equivalent to the value of the notes issued. The loans carry an average weighted loan-to-value of 59% with an average seasoning of 29 months. Geographically, the mortgages are concentrated mainly in the New Territories (60%), with the rest located in Hong Kong Island (21.4%) and Kowloon.

Australia - Retailer David Jones has launched a A$366 million financing package which includes the first single-tenant commercial mortgage-backed securities issue in Australia backed by the quality of the property, rather than the credit rating of the tenant.

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