Following the example set by the Italian government, Greece's securitization program seems to be gaining momentum.

In November, Hellenic Securitization SA launched a EURO745m synthetic issuance of structured notes involving a debtor in the Hellenic Republic. As Stephen King at Deutsche Bank explained: "This is the first securitization transaction to emerge from the Hellenic Republic. In October, the law which governs securitization transactions (originally passed in February) was enhanced to allow for the securitization of future flow receivables."

The Hellenic Securitization SA transaction is backed by future profits generated by the consignment deposits and loans funds (CDLF) which is payable to the Hellenic Republic.

The assets consist of mortgages made to state employees, where deduction of their mortgage payments is taken from their wages directly. The transaction was lead-managed by BNP Paribas, Deutsche Bank, Eurobank, Merrill Lynch and NBG International.

This issuance is part of a fundraising program to enable the Hellenic Republic to raise funds in the international capital market in an off-balance-sheet capacity before entering EMU in January 2001. Justin Fox at Merrill Lynch added: "The Greek government was looking to do an off-balance-sheet transaction, thereby diversifying its funding and investor base."

The transaction was launched in two series, as detailed below.

*Series 1, EURO450m, both rated Single A minus by S&P and A2 by Moody's. 6me+18bp (average life 4.2 years).

*Series 2, EURO295m, (10.2 years average life) rated A minus/A2, pays a fixed rate coupon of 5.875% and a spread of 23 bp over mid-swaps.

The transaction achieved very good funding costs for the issuer, and also benefited from the fact that it was 0% risk-weighted. The Greek government has provided a guarantee for the transaction. In fact, the Hellenic Republic unconditionally and irrevocably undertakes to pay sufficient funds to the issuer and the trustee, to enable the issuer to make up any shortfall. This is in order to effect the payment in respect of its expenses and the interest and principal due on the notes.

According to Stephen King at Deutsche, from a rating agency perspective the quality of the collateral on its own was not high enough to grant an A2/A-minus rating equivalent to that of the Hellenic Republic, and that is why the transaction necessitated a government undertaking.

Still pending are two deals which have been known in the market for some time. The IKA (Greek social security agency) securitization has been mandated to BNP Paribas, National Bank of Greece and Schroder Salomon Smith Barney/Citibank.

A further transaction involving future receipts from the national lottery is also in the pipeline. One market practitioner believed that it was likely that these securitizations would be completed before the year-end.

Justin Fox is hopeful that we will be seeing other Greek securitizations next year, as he explains, "The Greek government has passed a new securitization law and invested a lot of time and resources in the overall securitization project. I think that the work that the government has done could herald the continued use of securitization technology in Greece."

"The transaction has been successfully received, and there are others in the pipeline," King added. "Apart from active government support, securitization in Greece will also receive a boost from European monetary union at the beginning of next year. Transactions will be able to be issued easily in euros, and this will have a positive bearing on transaction economics." - courtesy of International Securitization Report

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