Continued improvements to the Portuguese securitization law have paved the way for three repeat issuers to bring consumer asset deals to the market sometime this quarter. And, with a seemingly full ABS pipeline, a collateralized debt obligation transaction and a mortgage-backed deal are said to be lining up to follow suit.

Banco Banif is in the market with Atlantes Finance No. 2 Plc, a Euro 150 million (U.S. $133.4 million) deal backed by a mixture of consumer loans and equipment leases. At the same time, Banco Mais is gearing up to launch BMORE Finance No. 3 Plc, a Euro 100 million (U.S. $88.9 million) auto loan deal. The first of these two deals to launch will be the first consumer-oriented deal come to market under the new securitization law.

In the meantime, Banco Espiritu Sancto is working on Lusitano Finance No. 2 Plc, a Euro $450 million (U.S. $400 million) transaction also backed by a mixture of consumer loans and financial leases. However, unlike the Atlantes and the BMORE transactions, this deal will launch under the old law.

"Lucitano probably started working on the deal long before [recent revisions to the law] and so that's probably why they decided to go the old way," said Jose Ramn Tora, an analyst with Standard & Poor's in the Madrid office. "New transactions still have the option to go through the 99 law or the civil code. They don't necessarily need to go through the new law. There are some other deals in the pipeline, but it's not 100% clear if they will go one way or the other. My guess is that they might go with the new law."

While all three of the transactions are deemed to be rather typical of the Portuguese market, some sources are most intrigued by the Atlantes transaction. "We would favor the Atlantes deal; it's interesting," said one market analyst. "It's under the new law and it's more clear."

"It is a period of time where originators are trying to decide if it would be more efficient one way or the other but I would think that eventually there will be an interest in doing everything through the new law," added S&P.

Changes to the law

The development of the securitization law in 1999 was intended to inspire securitization transactions. The market was expected to heat up and it has not, until now, sources said. The law came as a great accomplishment, though it was not without problems.

The first issue with the law was that it contained legal problems associated with RMBS transactions. Under the original law, a withholding tax was deducted on payments to a securitization vehicle from a domestic obligor or from a securitization vehicle to offshore buyers. The withholding tax was finally lifted last year, which gave way for the first deal under the new regulations to come to market. Magellan Mortgages No. 1, a Euro 1 billion (U.S. $889.3 billion) RMBS transaction led by ABN AMRO hit the market last year, opening the floodgates for more transactions of the like to come this year (see ASR 12/17/01 p.15).

Regulators have recently tended to other existing problems with the securitization law, including the relatively high administrative and regulatory burden and costs associated with setting up an FTC or Sociedade de Titularisaco, which are said to have stalled the number of users of Portuguese SPVs (see ASR 1/28/02 p.20). The new revisions allow for recent deals such as BMORE and Atlantes to tap the market. "There's been more changes to the [legal] framework in order to make it easier for [issuers] to securitize," Tora said.

In addition to the changes in the law, sources say that the market is also growing because many banks in the region need to improve their liquidity and/or capitalization. "Some of the banks in the system would like to improve their liquidity or their capitalization or both, so they're using securitization for that and it seems like consumer assets are the main assets that they are using for this," Tora said.

While consumer asset deals seem to be the most popular this year, there are also said to be mortgage deals and CDOs in the pipeline. Further, while many repeat issuers will be tapping the market, there are some new entrants looking to get in on the action. "Considering that it's only the end of the first quarter, it looks to be more active than last year," Tora said.

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