The much anticipated development of Spain's securitization market away from a predominantly mortgage-backed market looks to be gathering pace, with the news that Banco Bilbao Vizcaya Argentaria (BBVA) is working on only the second CLO out of Spain and the first CLO to be funded through the public bond market.

The floating rate issue - backed by corporate loans and lines of credit made to 42 mainly Spanish companies and originated by the former Banco Bilbao Vizcaya - will total e1.115 billion ($1 billion). It is split into five tranches with maturities up to 2014 and called BBVA-1. Preliminary ratings from Standard & Poor's and Fitch IBCA range from AAA to BB.

The deal is being underwritten by BBVA itself along with Goldman Sachs. Launch is set for the end of February.

Following just behind comes Titulizacion de Activos (TDA), the Madrid-based securitization fund best known for the TDA series of mortgage deals. It too is working on its first CLO, in its case a deal backed around 7,000 small business loans originated by six national and regional banks, said TDA's Jose Trujillo.

The pass-though transaction - which will total around e500 million and is expected to launch at the beginning of March - parcels loans made by the banks from funds provided by the central government and earmarked for small businesses. The proceeds will then be relent to small businesses. "This will double that line of credit," Trujillo said.

It will be divided into two tranches, each with 2.5 year average lives. The first tranche, worth around e400 million, will get an AAA rating from Fitch IBCA, based on an explicit central government guarantee; while the remaining e100 million tranche will be rated AA.

TDA is in the process of hiring an investment bank to place the paper - EBN Banco looks favorite - which will be aimed internationally, rather than just at domestic investors.

Trujillo said that the paper should be particularly attractive because the government guarantee will give it a zero risk-weighting. He added that TDA is working on further similar deals.

The first Spanish CLO, which was funded through commercial paper, came last year from Banco Santander.

Market watchers welcomed the news that CLOs are picking up as a broadening of securitization in Spain, which has been dominated by largely domestically-placed mortgage deals.

"Spain is moving more into the mainstream of European securitization," one analyst said.

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