Though new asset classes are emerging, the Spanish securitization market's strong pace is still attributable to the tried-but-true mortgage-backed securities market.

The Spanish mortgage market is counted as one of the oldest in the European market. According to a Deutsche Bank report, Spanish MBS stands out because of performance-related upgrades. For example, Moody's Investors Service recently raised its ratings on the following: Hipotebansa III and IV; and U.C.I. 2 and 3. The class B mezzanine mortgaged-backed floating rate notes were upgraded to double-A from single-A.

As it exists today, Spanish legislation only address the securitization of certain bank loans, such as mortgages and revenues from toll highway operations. All other structures require approval, which can make for lengthy execution periods. For many market participants, the existing laws are still considered too rigid and non-conducive to new structures, which caused some of the new asset classes proposed earlier this year to be postponed, most likely into 2003.

Nonetheless the market has seen its share of new transactions in 2002, and market sources said that deals like Peugeot's E1.5 billion Auto ABS Compartiment 2002-1 will pave the way for others. In fact, it is likely that auto receivables will emerge as a strong asset class.

Also notable, Caja Madrid managed to bring an innovative E107 million deal using a synthetic structure (not supported under the current legislation) from a pool consisting of auto loans, consumer finance loans, mortgage loans and loans to small and medium sized companies. Additionally, the Spanish market this year also saw its first CMBS transaction, a E319 million deal from Ahorro y Titulacion SGFT SA. "MBS continues to be the driving asset class with momentum, but the laws to facilitate other asset classes means that they are catching up," said one market source.

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