An Indonesian securitization that closed just before the onset of the regional financial crisis recently paid down, much to the relief of all the parties involved.

The transaction a $178 million, motorcycle loan-backed deal issued via Indonesian Motor Vehicle Funding Ltd. closed in October 1997, days before Asian currencies started widening out after the Hong Kong stock market crash. It was rated triple-A by Moody's and Standard & Poor's based on a wrap provided by Financial Security Assurance (FSA), and placed in the U.S. 144A market and the Euromarket.

FSA did not have to make any payments on the insurance policy, and originator Putra Surya Multidana (PSM) continued to service the loans without any problem. "This closed just as things started going to hell in Indonesia. Everyone was really nervous that it wouldn't hold up," said a source in Hong Kong.

The transaction is testimony not just to the strength of the structure but also of securitization in general. "This is a very good case study of how securitization structures protect investors in the worst possible scenario, even in the midst of the Asian financial crisis, which is the worst imaginable," commented Anthony Dixon, head of securitization at Nikko Salomon Smith Barney, who arranged the transaction for Salomon Brothers in Hong Kong. "In hindsight, it's unfortunate that more Indonesian companies like PSM didn't take advantage of securitization before the crisis started."

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