In a surprise move, Banco BBA Creditanstalt priced its $50 million 10-year, five-year non-callable subordinated debt issue last Wednesday, sources said. Lead manager Merrill Lynch had roadshowed the deal in early June, but the transaction was put on the back burner as Brazilian sovereign debt went into meltdown. The deal's small size, innovative structure, and investment-grade Baa3' rating, however, seem to have insulated it well from the foibles of the market. The transaction priced at 99.736 with a 10.375% coupon to yield 10.44% at a spread of 646 basis points over Treasurys. The coupon steps up to 13.625% after year five.

The deal is the first international bond issue to be backed by a partial credit guaranty from the International Finance Corporation (IFC). The multilateral has used the product in local markets before to help issuers gain market access. The same principle guided its involvement with Banco BBA, as the credit would likely not have achieved an investment-grade rating with the political risk insurance-backed structure employed by larger Brazilian banks to sell sub-debt in the past. The trade strengthens Merrill's reputation as leader in the niche market, as it has already sold sub-debt for Banco Itau and Banco Bradesco with relative success.

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