Brazil's Banco Itau offered a detour from a bout of triple-A product out of Latin America and came unwrapped with a US$105 million securitization of diversified payment rights (DPRs), its first uninsured deal off this program. The legal final maturity is seven years.

While guarantors are not exactly climbing over each other to get to Brazilian issuers - Ambac and XLCA have yet to lift their ban on the country - Itau is understood to have talked to both MBIA and upstart CDC IXIS Financial Guaranty Services (CIFG). The first news of a smallish Itau transaction immediately stirred speculation that CIFG would court the issuer. The easily digestible size and familiar name would have been an ideal way for the guarantor to debut in the region, sources said. But apparently Itau preferred to go bare.

Led by Merrill Lynch, the deal closed Nov. 25 at 6.163% or 290 basis points over five-year treasuries, in line with recent DPR transactions. But cost was only one of the issuer's considerations, according to Antonio Sequeira, general manager of international treasury at Banco Itau. "We were trying to diversify our investor base," he said. As the previous four series off the program had been wrapped, they went to a particular crowd of investors. Moody's Investors Service, Standard & Poor's and Fitch Ratings rated the current deal Baa1', BBB' and BBB+'.

Unconfirmed talk held that the unwrapped transaction was at least in part the result of a reverse inquiry from one or more investors. Though different from previous investors, the circle that went for the present deal was tiny, perhaps numbering no more than three, according to sources.

On the cross-border side, Itau kept Linklaters as legal counsel from the last deal in early July. Merrill used Dewey Ballantine. Tozzini, Freire, Teixeira e Silva handled domestic law.

The paper is backed by flows from future and existing DPRs originated by Itau. They include export and workers' remittances and foreign direct investment, among other transactions. Since the program's inception, debt service payment coverages have averaged around 30x, according to a Fitch report.

Coinciding with a press release on the deal, Fitch upgraded the stand-alone ratings on the wrapped series to BBB+' from BBB'. The move was prompted by an upgrade of the sovereign to B+' on Nov. 6.

Itau might turn out to be the last cross-border transaction of the year, which would make for a pretty dull fourth quarter. Blame it on the gush of issuance in the third quarter, players said. "Issuer and investor fatigue has already set in," said one New York banker. "I doubt we'll see anything before next year."

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