Wachovia Securities was heard roadshowing its second Latin American ABS last week, a US$75 million transaction for Banco Salvadoreno. The deal is backed by diversified payment rights (DPR) and tenor is expected to come at between five and seven years. Salvadoreno had been initially working with Merrill Lynch on a DPR deal; when that commitment expired, Wachovia moved in. The structure is understood to be similar to what Merrill had conceived, with some tightening. "The new bankers wanted to put their stamp on it," said a source familiar with the transaction.

The debt-service coverage ratios will trigger early amortization if they slip below 5X for the month and 8X for the quarter. The trigger ratios were previously 3.5X and 6X, respectively, as spelled out in a Fitch Ratings report released in November 2002. Wachovia also upped the percentage of collections that must be maintained with correspondent banks for three collection periods in order to avert early amortization. That figure was punched up to 70% from 60% initially.

Citibank, Wachovia, and Bank of America are the correspondent banks that have pledged to pay remittances through the offshore accounts controlled by the trustee. BancoSal - a U.S. entity fully controlled by the originator - will also sell rights to its remittances to its parent, which will in turn sell those to the special purpose vehicle. BancoSal handled 12% of eligible DPRs in 2003.

While potentially making a difference to investors, the structural tweaking has not appeared to boost the transaction's credit standing. Fitch has not changed its rating on the transaction from the BBB' assigned in its prior incarnation. Standard & Poor's has also given the deal a BBB'.

Legal counsel for Salvadoreno was Dewey Ballantine on the cross-border front and Delgado & Cevallos domestically. Wachovia used Mayer, Brown, Row & Maw and Guandique Segovia Quintanilla, respectively.

This deal marks the first time the originator is securitizing all of its future DPRs in the form of MT100 and MT200 payment order messages, according to an S&P report. Overcollateralization and the bank's strong position within the Salvadorian banking system help underpin the transaction's investment-grade rating, which is two notches above the sovereign for both S&P and Fitch.

Salvadoreno processed roughly US$877 million in remittances in 2003. Those flows came from export payments, family remittances, capital flows and other sources.

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