Chilean structurer Securitiza- dora Bice is readying a deal that is likely to be the second ever U.S. dollar-denominated bond to hit the domestic securitization market. Sized at US$50 million, the six-year paper will perfectly mirror the collateral, which is comprised of notes to be issued by Societe Generale Option Europe (SGOE) on the Luxembourg Stock Exchange.
In an interesting twist, the coupon is 0% and a final bullet payment is tied to the performance of a fund administered by companies related to Societe Generale, according to a release from Standard & Poor's affiliate Feller Rate.
The idea is to enable Chilean investors to indirectly buy overseas notes, since they cannot purchase them outright under current rules. Regulatory changes that would allow locals to buy foreign fixed-income instruments have been stalled for the last few months.
The deal is slated for June, a source said. The final yield is indexed to the PRS Fund V, which engages in unconventional investments, according to Feller Rate.
Apart from structuring and issuing the transaction, Bice will be primary servicer. Securitizers in Chile often take on all three roles, particularly when the structure is uncomplicated. Feller Rate and Moody's Investors Service affiliate Humphreys have both rated the transaction AAA' on the national scale, largely due to the fact that the notes will be guaranteed by Societe Generale, rated AA-' and Aa3' on the global scale, respectively.
Bice is no stranger to securitizing paper from overseas. In the past couple of years, the structurer has crafted deals in the domestic market backed with dollar-denominated global bonds issued by Chilean blue-chips Empresa Nacional de Electricidad (Endesa) and its parent company Enersis. Those deals have recently met trouble as rating agencies have either downgraded or issued negative credit watches on the underlying collateral. Humphreys cut the securitized deals to A-' from AA' on the national scale after Moody's dunked the global currency rating of Endesa and Enersis by two notches. Fitch Ratings has both the securitized deals and the underlying collateral on creditwatch.
A source close to the upcoming deal said the transaction is considerably safer than its predecessors given that Societe General's rating is a few notches higher than Chile. "Even if (the collateral) went down two notches, the deal would still rate triple-A locally," the source said. Another difference between the new deal and the outstanding securitizations of cross-border paper is that the latter are denominated in inflation-indexed units (UF) and thereby entail currency hedging.