Cross-border issuance from Latin America and EEMEA perked up last week, fueled almost exclusively by Turkish banks, with the exception of a lone Mexican ABS. Combined, three bulky transactions from latter-day Asia Minor took total volumes to over $2 billion, according to sources.
The heaviest deal came from Akbank, which placed roughly $1 billion via sole lead WestLB. Some $600 million of the transaction was comprised of three wrapped tranches, all of which priced at 25 basis points over Libor on June 23. MBIA covered $250 million in an A class, Ambac covered $250 million in a B class and XLCA wrapped $100 million in C class notes. The A and C tranches have a seven-year final maturity and average life of 5.1 years, while the B tranche has an eight-year final maturity and 5.6-year average life. The transaction also includes unwrapped tranches and a $250 million private placement, with one or more wrapped components, said a source close to the deal. Pricing details on those pieces were not disclosed at press time. Standard & Poor's and Moody's Investors Service rated the wrapped tranches triple-A.
U.S. investors purchased about 40% of the publicly disclosed portion, while European buysiders took the other 60%.
The deal is backed by diversified payment rights, linked to electronic money payments handled through Akbank. These rights cover U.S. dollar-, euro-, Swiss franc- and sterling- denominated transfers that include flows from worker remittances and export payments.
By assets, Akbank is the second-largest private sector bank in Turkey. It had about $25.9 billion of unconsolidated assets at December 31, 2004, according to a release by Moody's. The agency said the bank boasts higher margins than its competitors, thanks to the high proportion of assets denominated in former Turkish Lira and low cost customer deposits.
Virtually simultaneous to the Akbank transaction, WestLB, along with joint lead Standard Chartered, underwrote a $750 million DPR deal for Turkiye Vakiflar Bankasi (Vakifbank), according to a source familiar with the deal. With a seven-year final maturity and an average life of 5.3 years, the transaction will be distributed after the summer, either as notes, a syndicated loan or a combination of both. The distributed pieces could come wrapped as well, the source added. The pricing, which was not disclosed, has already settled for the issuer. Moody's rated the deal Baa3.'
The transaction takes the total of Vakifbank's securitization program to $1.45 billion. WestLB has arranged deals off the program since 2001.
Also reported to have priced last week was Turkey's Denizbank. Initially heard at $200 million, the DPR deal was understood to be closer to $300 million and comprised of three tranches. With Merrill Lynch as sole lead, the notes have a final maturity of five years and a Baa3' preliminary rating from Moody's (see ASR 6/13/05).
Denizbank focuses on small- and medium-sized companies, exporters and retail banking clients, according to a report from Fitch Ratings. It ranked as Turkey's seventh largest private sector bank at the end of 2004, with a 2.18% share of total unconsolidated banking assets. However, the bank has been growing at a much faster clip than its peers, with assets swelling by 25.59% in 2004 and 29.21% the previous year, compared with the industry averages of 9.14% and 3.62%, respectively.
Despite its outsize contributions, Turkey didn't entirely monopolize the cross-border market last week. A long-awaited transaction from Mexican housing finance company Metrofinanciera priced last week via sole lead Dresdner Kleinwort Wasserstein. The 144A transaction, without registration rights, had a $150 million, Ambac-wrapped tranche pricing at 36 basis points over three-month Libor. An unwrapped piece worth $60 million priced at 167 basis points over Libor. Moody's and S&P rated that tranche Baa1' and BBB+', respectively. The final maturity is seven years, with an average life of roughly six years.
No information was available at press time on the investor distribution of the unwrapped tranche, a topic of much interest among emerging-market aficionados, given the novelty of the collateral for much of the buyside.
The transaction is backed by bridge loans for housing construction, an asset class with a history in Mexico's domestic ABS market, but new to U.S. investors. The bridge loans in the pool have an average maturity of 18 months, which means the portfolio will revolve.
Because there is a mismatch between the peso denomination of the collateral and the dollar denomination of the paper, the transaction has a currency and interest-rate swap provided by Dresdner Switzerland, whose obligations are guarantyd by Dresdner Bank. The swap absorbs the risk of dramatic exchange-rate movements, locking in the peso-to-dollar rate at the settlement of the deal, and also protects against risks that are more political in nature, such as capital controls imposed by the Mexican government.
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