At the close of 2002, receivables investment funds in Brazil were no more than a gleam in the eyes of bankers and analysts. Hopeful that the vehicle's tax perks would draw originators, players for months preached the virtues of the so-called FIDCs in vain. The climate simply wasn't right. But one year later, the converts are coming in droves.

Shortly after ASR went to press, petrochemical leader Braskem was expected to launch the first half of a R$200 million (US$68 million) program via the FIDC vehicle. Banco Santander and Banco Itau are joint leads.

Meanwhile, local bank Banco Votorantim was roadshowing an FIDC for a company in a similar business line, Petroflex. Sized at up to R$60 million (US$20 million), the transaction is backed by a revolving purchase of trade receivables and marks the first venture of Votorantim into the FIDC playing field. "We think FIDCs are going to represent a powerful instrument for companies and a profitable investment for qualified investors," said Patricia Orozco, underwriting analyst at Votorantim. The newcomer has other transactions in the works, she added.

Standard & Poor's has rated the R$51 million (US$17 million) senior chunk of the Petroflex fund brAAAf' on the national scale. The fund is open-ended and has a maturity of three years. At that time, the company will decide whether to relaunch. Subordinated shares totaling R$9 million (US$3 million) will provide a cushion for investors. Petroflex will hold the junior shares. The targeted return on the senior shares is 104.5% of the CDI interbank interest rate. Investors can redeem their shares after holding them for 60 days.

Votorantim was shopping Petroflex around to qualified investors, including clients of the bank's asset-management branch, which will administer the fund as well. "We expect good demand," Orozco said. Because FIDCs are a hybrid of investment funds and structured vehicles, an asset manager typically fills the role of trustee. Pinheiro Neto is providing legal counsel on the transaction.

As Latin America's leading producer of synthetic rubber, Petroflex competes shoulder-to-shoulder with the likes of Exxon Mobil Corp., Dow Chemical and The Goodyear Tire & Rubber Company.

In the wake of Petroflex, auto-loan lender Omni Financeira is set to do some market flexing of its own. In the works is a closed-end FIDC of up to R$60 million (US$20 million), to be issued in tranches of R$10 million (US$3.4 million) each. The program is set to close within five years of launch, but the tenor of the individual series is timed at two years. A mix of senior-to-junior shares is set at 75% to 25%. Fitch Atlantic Ratings has given the deal a preliminary rating of AA+(bra)' on the national scale.

Omni targets the low end of the auto market, providing high-interest credit to owners of used vehicles. "It's definitely a sub-prime auto asset class," said Jayme Bartling, senior analyst at Fitch Atlantic. Integral Trust is the underwriter and the asset-management unit of local conglomerate Brascan will handle trustee functions. To encourage a secondary market, Brascan will register the fund with Brazil's over-the-counter market. The target return on Omni is 112% of CDI.

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