Israel wants in...
Makhteshim Agan Industries (MAI), one of the world's largest generic agrochemical companies, isn't playing any games when it comes to jumping into the structured finance arena. With the recently launched $150 million securitization program, MAI has made history marking the country's first-ever securitization initiative - which has found a home in the ABCP market.
While there have been some structured transactions in Israel, there has never been any type of securitization - transactions have never gone through the rigor that this deal has seen, in terms of true-sale structuring and tax analysis.
Making a bold statement, MAI wanted market players to know that Israel is also a member of the corporate finance world. Banc of America Securities (BofA) first introduced the idea of a securitization program to the company late last year, when it was looking for a solution for a trendy off-balance sheet funding mechanism. Earlier this year, BofA won the mandate as the sole arranger in the transaction.
The 364-day rolling program is unique in that it is denominated in U.S. dollars, Euros, and Shekels. A special purpose vehicle was established in Ireland, which will purchase the trade receivables from a number of MAI subsidiaries in Israel, the United States and Europe. The trade receivables are generated from the sales of agrochemicals that MAI has made to big name buyers around the world. The SPV is then ultimately funded by commercial paper issued out of the United States commercial paper market.
Moody's Investors Service has provided a P1 rating and Standard and Poor's has assigned an A1-plus rating to the multi-seller conduit. MAI will serve as the master servicer for the program and its subsidiaries will be responsible for the collection process.
Additionally, the company will increase its liquidity, enhancing future business opportunities and reducing the amount of credit that is extended to clients.
"This transaction has paved the way for other similar transactions in Israel," said Sandeep Chaudhry, vice president of global asset-backed securitization in London for BofA. "We did all of the legal analysis, tax analysis and the accounting analysis and the rails have been greased for other issuers - now that we have done that we are going to turn the engine on and rev it up."
According to Chaudhry, BofA is in talks with other issuers in the country about future transactions. "This structure and technology can be used across the board, in various types of securitizations - for mortgages, for autos loans for trade receivables - a number of different things in Israel," Chaudhry said.
For the most part, deals will likely hit Israel's domestic market given the lack of liquidity in hedging the shekel on a term basis, according to Chaudhry.
Despite the troublesome headlines with regard to Israel, the country is economically stable. S&P currently has an AA-' rating on Israel's sovereign foreign currency, Moody's has an A2' rating and Fitch has provided an A-' rating, all with stable outlooks.
BofA has recently established a rep office in Israel, although the firm has been covering the country for many years.
"The European market has been very robust and one of the things that we have been looking at doing is expanding our jurisdictions," Chaudhry said. "Israel seems like a very attractive country - they are an A-rated country with a currency that is dollar pegged - they have a strong economy."