Supermercados Norte, the largest supermarket in Argentina, is spicing up the local market with a 10-year $350 million synthetic security transaction, expected to close within the next two weeks, according to sources.

While the deal is a domestic transaction, it features a similar structure to Gain Financial Trust, a cross-border transaction completed in June 2000 (ASRI 7/3/00 p.1). In this deal, Credit Suisse First Boston (CSFB) structured the deal as a pass-through transaction. Supermercados Norte will issue plain vanilla bonds to Phoenix Trust, however the collateral is composed of negotiable obligations issued by the supermarket.

The trust will collect interest and principal and will in turn pay the investors [of the trust] the amount of the bond. Additionally, trust holders will have the benefit of collecting the rate of the coupon, which is linked to the Euro index.

While the classes are divided evenly, with $175 million in the senior tranche and $175 million in junior tranche, Standard & Poor's has provided the same national rating of raAA- for both classes. According to sources, the division of classes was established to meet the needs of the investors.

The 10-year maturity and the amount of the deal make the transaction a bit unique for Argentina. "What is interesting is the huge amount of the deal and the long maturity," said a source close to the deal. "We haven't seen this type of maturity, with the exception of mortgage-backed transactions. It is very interesting to see a synthetic security with such a long maturity."

Like other transactions that have come to market this year this deal was also in the pipeline last year, however volatility in the Argentine market delayed the process. Sources also said the deal was postponed as CFSB was searching for the best structure for the transaction.

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