Cultivating a trend, the Italian state institution for compulsory insurance against accidents and illness, INAIL Societa di cartolarizzazione p.A., has closed a EURO1.35 billion deal (USD $1.2 billion), similar to a Lit8 trillion (USD $4.35 billion) deal that was completed in 1999 by the Italian state pensions agency, Instituto Nazionale della Previdenza Sociale (INPS).

INPS launched the initial deal of this kind last November and announced that it planned to launch a series of deals worth at least EURO8 billion over the next three years. At the same time, the treasury announced it was looking to arrange the INAIL transaction. More recently, the Italian government has also given the mandate to investment banks to arrange the second transaction from INPS.

Unlike the INPS deal, which contained only nonperforming receivables, the INAIL transaction consisted of both performing and nonperforming receivables. On the date verification, if the amounts are less than the guaranteed amount, INAIL has said it will provide additional receivables performing or nonperforming or cash, which caused some concern for the rating agencies.

Other reservations pertaining to the deal included the fact that unlike an ordinary private-sector deal, the servicer cannot be changed and those in arrears have the ability to make one payment for income taxes, social security contributions and some local taxes, which may create exposure to the Italian government entities. Furthermore, there is an inability to complete a full verification by September 2001.

Despite the reservations, Standard & Poor's was able to rate the deal AAA as a result of the good history on the collection of contributions, conservative advance rates, diversity in the obligor pool and the liquidity created by the performing receivables, among other aspects.

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