Austria is headed down the same successful path as neighboring Germany, issuing its first publicly traded auto-loan and leasing ABS transaction. Last week Standard & Poor's issued a preliminary triple-A rating to the EURO384 million class-A tranche and a single-A rating to the EURO16 million class-B tranche.

"Structure can become a vital instrument for institutions where new equity is relatively hard to get," said S&P analyst Torsten Althaus. While it's Austria's first, Althaus stresses that the auto transaction's structure is not unlike its German counterparts. Its function is similar as well, except that the originating company is Austria-based.

Porsche Bank AG is at the seat of this new deal and lead manager ABN AMRO is conducting its course in the market. Like any new structure that emerges, due diligence issues will arise, Althaus said, which primarily revolved around whether the Austrian insolvency laws properly addressed the nature of the existing commingling risk.

According to S&P legal counsel: "Some of FACT-2001's rights and ownership interests were assigned as security to the trustee, KPMG Treuhand & Goerdeler GMBH, Frankfurt, under the security documents. S&P received legal assurance that the assignment to KPMG under the documents is valid and enforceable against FACT-2001 and its creditors, including in its insolvency, under relevant law.

"Furthermore, in the event KPMG were to become bankrupt, comfort was provided that the assets transferred or assigned to it would not be part of its estate or available to satisfy any claims of the trustee's creditors."

The structure dictates that ABN AMRO will provide a guarantee that ensures collections are paid from Porsche to the SPE, FACT-2001, thus covering the commingling risk in relation to Porsche Bank.

Upon closing, the issuer will purchase a portfolio of auto leases and loan receivables, which totals EURO400 million. Interest payment dates on the notes will be Dec. 15, 2001, with the final maturity of the notes occurring in December 2007 for the class A and B notes.

Given the strong Austrian car financing market and the strong position of Porsche Bank AG, it is possible that this deal will awaken a trend in that market; however, it is unlikely that this activity will be enough to stir up ABS volumes in Austria. Althaus said: "There are two or three other companies with the potential to issue, but will they have enough volume to enter the term market?"

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