Brazilian state-owned development bank Banco Nacional Desenvolvimiento Economico e Social (BNDES) made an impressive debut in the securitization arena earlier this month with the successful launch of Regional Jet Equipment Trust.
Salomon Smith Barney acted as the arranger for the $191 million transaction, which used the EETC structure to monetize receivables from American Eagle Corp.
The receivables were generated by the sale of 42 EMB 145 aircraft manufactured by Empresa Brasileira de Aeronautica S.A (Embraer) to American Eagle. The payments are fully guaranteed by American Eagle's parent company AMR Corp.
The $178 million senior tranche priced at 115 basis points over Treasurys and was rated Aa2 by Moody's Investors Service and AA-plus by Fitch IBCA. The $13 million junior tranche priced at 135 basis point over Treasurys and was rated Aa3 and AA by Moody's and Fitch respectively. The notes mature in September 2004.
The credit enhancement in this transaction was derived from the credit strength of the underlying payments from American Eagle, the recovery value of the aircraft securing the loan agreements and a liquidity facility provided by Citibank.
"I believe that the guarantee by AMR Corp. was the main reason for the tight spreads," said a source from the banking sector. "It is a very well-known, solid company and the fact that it guaranteed that payments would be made to the offshore trust offers great security to investors."
The deal, which is being sold to U.S. investors in the 144A market, is expected to close this week.
The success of this oversubscribed deal could bode well for other Brazilian exporters in need of long-term financing. BNDES provides financing to a wide array of Brazilian companies and hopes to develop securitization programs for them as well.
"We are extremely pleased with the results of this offering," said Guillherme Studart, finance officer at BNDES. "It is our first securitization and we received interest for three times the original amount. We feel better prepared for future transactions, although at this point there is no clear indication of what our next deal is going to be."
The deal had been in the works since February 1999 (ASRI 5/3/99 p.3). "These type deals are very complex," said Studart. "That's why it took a while to structure the offering. It was our first time and we wanted to get it just right."