Russia's Alfa Bank returned to the structured finance market last week, issuing a five-year legal transaction backed by diversified payment rights (DPRs), with one tranche in dollars and another in euros. A 230 million ($306 million) tranche priced at 190 basis points over three-month Euribor, while a $260 million piece priced at 190 basis points over three-month Libor, 30 points outside the first $350 million transaction placed last March. Moody's Investors Service rated the new deal Baa3'.

Dresdner Kleinwort Wasserstein and Merrill Lynch led the transaction, which was sold to a diverse group, according to a source close to the deal. The euro tranche went to roughly 25 investors, with the book dominated by ABS - as opposed to emerging market - aficionados. Bank investors took about 40% of the euro-denominated piece. As per the geographic breakdown, the U.K. accounted for 40%, Ireland for 25%, and the continent snapped up the rest.

The dollar chunk, meanwhile, ended up with 13 to 15 investors, according to the source. A good number of these buyers bought into the initial transaction. In contrast to the ilk of investors on the euro side, emerging-market and private placement regulars loomed large in the dollar piece.

The transaction marks the fourth time this year that Dresdner and Merrill have jointly led a deal backed by Russian assets. The arrangers have built a symbiotic relationship on their complementary strengths in distribution, the source said, with Dresdner relatively stronger in Europe and Merrill in the U.S.

DPR payments processed through Alfa totaled $11.2 billion in the first nine months of 2006, up 13% from the $9.9 billion posted during the same timeframe last year. Flows averaged 15.9% annual growth from 2001 through 2005, hitting $14.1 billion in the final year. The vast majority of Alfa's DPR orders are in dollars, but the share of euro flows is rising.

Alfa is Russia's largest private bank, and belongs to Alfa Group Consortium, a leading conglomerate in the country.

Future flows deals from the former Soviet Union have recently come out of hibernation, with the Alfa deal emerging a few weeks after a $498 million-equivalent DPR deal from Russia's MDM Bank and a $200 million in DPR paper from Kazakhstan's Alliance Bank. Despite this mini-renaissance, players say existing assets will remain the more fertile soil for securitization.

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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