Undeterred by dizzying market turbulence, Colombian banks are forging ahead with domestic securitization of commodities. Talk is circulating of a US$50 million-equivalent deal backed by future flows from oil company Hocol. Local investment bank Helm Investment Advisors has the mandate, which was initially in the hands of Citivalores, according to sources. Hocol is a unit of Saudia Arabia's Nimir Petroleum Company.

In a sure sign that issuers are avoiding cross-border trauma, the Hocol deal is heard to be entirely local and peso-denominated, even though the oil exporter likely pulls in significant revenue in dollars. "I don't smell any cross-border deals wafting around right now," said one Bogota-based source at an international bank.

A looming hole in next year's government budget and Brazilian contagion have soured international investors on Colombian issuers.

Domestically, apart from oil, other commodities have piqued the interest of securitizers, particularly in the emerging arena of agriculture and livestock. "There's great interest in structuring debt from the agribusiness sector," said Guillermo Esteban, business manager of Colombian bank Commodities & Banca de Inversion (CBI). "And there are people interested in investing in the sector."

Up ahead for CBI is a 10-year, Ps20-billion (US$7.1 million) securitization of future flows from palm oil, with a yield tied to CPI. Fitch affiliate Duff & Phelps expects to release a rating on the deal this week. Another palm oil-backed deal is also in the works. Arranged by professional association Propalma, that deal is worth Ps30 billion (US$17.8 million).

Commodity securitizations are hardly new in Colombia. A trust backed by young cattle earmarked for the slaughterhouse has been issuing one-year paper every 30 to 40 days since CBI set up the structure in 2000. Retail investors have been the chief buyers of the 18 issues made off the trust to date. Due to the short tenor, pension funds are not interested. Pricing on the most recent placements has come at the benchmark DTF interest rate plus 300 basis points. The spread on the first several placements came at 350 basis points.

CBI has also securitized sugar forward contracts. Earlier this year, they brought to market a five-year sugar-contract deal worth Ps40 billion. An A series priced at DTF+300 basis points; a B tranche yielded 800 basis points over CPI.

Esteban said the bank is now looking at new assets such as tobacco, bananas and flowers. CBI is also exploring the potential for bundling wood and cattle assets in a single trust.

Other bankers who have stood aloof from the agribusiness sector are taking notice. "It seems to us that some of the recent deals have been overcollateralized," said one Bogota-based banker at an international bank. "But the market is moving in that direction."

With the long-running conflict between leftist rebels and the government weighing on domestic agribusiness, sources say producers are starving for financing. "[Securitizations] are an excellent mechanism for reactivating the sector," said Patricia Gomez, an analyst at Duff & Phelps.

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