Astructure set up by HSBC is primed to become the first trust to issue a deal in Argentina since the country slipped into default last December. Rated BBB-'by Standard & Poor's on the national scale, the senior tranche of the groundbreaking one-year bond is worth Ps35 million (US$9.7 million).

"This is the first genuine securitization offered to the public...since the economy was pesified," said Hernan Gutierrez, head of trust & fiduciary products at ABN Amro Argentina, acting as trustee on the deal. ABN Amro has been involved in the few structured deals that have surfaced since the domestic debt market ground to a virtual halt early this year following the imposition of crippling capital controls and a torrent of defaults in nearly every economic sector.

An unrated, subordinated piece amounts to Ps10 million (US$2.8 million). Effectively a small CLO, the deal is backed by loans HSBC has extended to five local companies, Shell CAPSA, Resinfor Metanol, Terminales Rio de la Plata, Zucamor, and Petroquimica Rio Tercero. None of them carries a public rating from S&P.

Four of the loans were originally denominated in foreign currency then swapped into pesos as part of the sweeping pesification of the Argentine economy. One of the loans was always in local currency.

"This will permit HSBC to receive off-the-balance-sheet financing," Gutierrez said. "[The bank will] be getting 80% of the cash coming from the loans." It is understood that HSBC itself will swallow the subordinated piece.

The senior piece benefits from a subordinated tranche, which provides 20% credit enhancement. A reserve account adds further support.

The bond is a bullet and will mature exactly 365 days from issuance. The yield has been fixed at the CER plus 8%. The CER is a loan adjustment rate, which applies to other transactions in the economy as well.

If the deal garners regulatory approval promptly, it could arrive before the end of the month.

Pension funds are the target audience. While Argentina's economy has drastically shrunk, salaried workers are still making pension contributions. That has sustained a pool of liquidity, albeit a much diminished one. "This deal is going right to the funds," said Juan Pablo de Mollein, Associate Director of Latin American Structured Finance at S&P.

Fitch estimates that pension funds will pull in Ps70 million (US$19.5 million) to Ps100 million (US$27.9 million) on average per month in the coming year. "This should be considered a rough maximum amount available to invest in the Argentine financial market," the agency said in a report.

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