As high anxiety continues to grip plain vanilla Emerging Market debt, a window appears to have opened for ABS. Two transactions priced last week and another one is due out this week, according to sources.

In the second LatAm ABS deal led by Wachovia Securities, Banco Salvadoreno priced a US$100 million transaction on May 27, according to sources. Dollar-denominated diversified payment rights backed the deal.

A US$75 million, five-year legal final tranche yielded 300 basis points over one-month Libor, while a US$25 million, seven-year piece priced at 375 basis points over Treasurys. Fitch Rating and Standard & Poor's rated the deal BBB', and more than 10 investors bought in, according to sources. Cross-border legal counsel was Mayer, Brown, Rowe & Maw for Wachovia and Dewey Ballantine for Salvadoreno. On the domestic front, counsel was Guandique Segovia Quintanilla and Delgado & Cevallos, respectively.

Understood to have priced May 24, an export receivables deal from steelmaker Gerdau fared better than its visit to the market in mid-2003, said sources. Led by JPMorgan Securities, the originator obtained 350 basis points over five-year Treasurys on a transaction that will be ultimately sized between US$128 million and US$133 million, depending on the final decision of one vacillating investor. The legal final maturity is eight years and the average life is five years.

Amounting to a 7.321% yield, the spread came significantly tighter than the 500 basis points garnered in July 2003 on a US$105 million transaction with a legal final maturity of seven years. Back then, the company was competing against a third-quarter rush to market by Brazilian issuers, and, in particular, against rival steel producer Companhia Siderurgica Nacional (CSN).

Gerdau's latest issue threatened to be a re-enactment, as CSN was heard on an investor call last week, with the aim to price this week. Gerdau had two things going for it, according to sources. For one, it no longer carried the integration risk that might have tipped some investors in favor of CSN or other Brazilian issuers last year, when Gerdau was still merging with Acominas, a then 78.9% controlled subsidiary. Selective marketing worked in its favor, too, according to one buysider. Fitch will likely give the deal a BBB-'.

In the works for CSN is a US$150 million, eight-year deal backed by export receivables. BNP Paribas and Citigroup Global Markets are understood to be joint leads. Fitch and S&P have already rated the deal BBB-.'

Last week, Fitch upgraded the local currency rating of CSN to BBB-' from BB+' previously. The two issues the company closed last year carried a BBB-' rating, a one-notch departure from the usual practice of placing a future-flows transaction on par with the local currency rating. "We thought that, as long as they continued to export, bondholders would get their payments," said Gregory Kabance, director of Latin American structured rating at Fitch. He added that the relatively small proportion of structured debt indicated that a default by the company would probably hit its plain vanilla debt first. More than a determinant of the rating on an export receivables transaction, the local currency rating is a "good guideline," Kabance said.

In a report outlining the upgrade, Fitch said CSN had cut its net debt to US$1.7 million at March 31, from US$1.8 million on June 30, 2002. A terming out of its debt also helped bump up the rating. "As a result of several international capital markets transactions totaling US$1.2 billion, less than 30% of CSN's total debt is currently short term, compared to 45% to 55% during 2002," the agency said. The upcoming issue will push out the average tenor still further.

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