The basic story behind future flow structures is that they continue to perform well even in the face of economic difficulties. This has been enough to reinforce interest from monolines who have been monitoring this structure since its inception.
"These deals tend to be so over-collateralized that there is plenty of room for a decline," said one analyst. "A number of credit card deals out of Turkey where the receivables declined [due to the fall in tourism] are still performing well because they were three to four times over-collateralized. The blow was significant to cause worry initially, but not enough to actually affect the deals."
In Turkey the securitization market is mainly driven by the future flow structure (see ASR 3/11/02) and because of the tests that they have endured throughout the spotted economic history of this emerging market, the deals' success rates have peaked the interest of monoline companies in particular. "The deals have generally performed well and the monolines have seen that, and they see Turkey as a place where they can add value in terms of reducing spread," said the analyst. "This market is conducive to wraps and it opens it up to a broader group of investors."
In the past six months MBIA has wrapped the privately placed tap issue on Akbank's original credit card deal managed by Bank of America, and a privately placed $400 million diversified trade payments right managed by WestLB. "In general the added benefit behind doing these deals is that we get to diversify our books," said Ron Dadina at MBIA. "Now that Standard & Poor's is becoming more comfortable, investors are a little bit more comfortable. The rating agencies in general have been going round and round regarding this structure but as the market has matured so has the process."
The somewhat modified S&P criteria and the monoline's new ability to wrap a limited basket of deals that don't have underlying investment-grade ratings are factors that come together to bring MBIA and others back into the market, said Steve Gandy, managing director and group head of global ABS at Banc of America Securities.
Dadina at MBIA highlighted that going forward the growing interest on behalf of monolines should afford the market the ability to extend the deal life, which are typically short, about five to seven years, among some of the benefits afforded by wraps. Additionally it turns out to be more cost-effective and permits issuers to access a totally different investor base.
Beyond Turkish future flow securitizations MBIA has also looked at deals originating from South Africa, Trinidad and Tobago, and Brazil. Dadina said the company is currently looking at some new countries as well.
Going forward, the performance success of past future flow structure will be enough to garner the attention of additional countries, said one analyst. On the immediate list is Egyptian securitization. Much like the Turkish economy, Egypt relies on tourism revenues, which could facilitate the securitizations of foreign credit card merchant voucher reimbursements.
