Argentina's Banco Bansud SA (Bansud) has swept into the market with some early spring cleaning as its latest $360 million privately placed ABS transaction backed mostly by non-performing loans marks the first of its kind in all of Latin America. Sources say the intriguing deal may inspire other industry players to follow suit and begin cleaning out their closets.
The deal has been called Saneo Serie 01 Cartera Comercial (Saneo), which, loosely translated, means to clean out or protect against damage. And the objective of this deal is just that: Bansud is attempting to improve its financial standing by cleansing its balance sheet of problematic loans and at the same time reaping the tax benefits.
While the deal is backed by a pool of both performing and non-performing loans, the non-performing loans make up the core of the portfolio, which is a first not only for Argentina, but also for Latin America. The portfolio includes personal loans, mortgages, auto loans and other asset classes. The loans were granted for commercial clients and therefore most of the portfolio has a guarantee or is backed by collateral.
Deutsche Bank structured the deal and worked with KPMG to establish the best criteria for the evaluation of the more than 200 loans. Each loan and each guarantee was individually evaluated and provided with an estimated value.
"The structure is strong and tailor-made specifically for this deal - it's not following a standard," an analyst close to the deal said. Additionally, the deal was given a flexible amortization schedule with a legal maturity due December 2030.
Given the characteristics of the transaction, the role of the servicer is key. As a result, Banco Nacional de Mexico (Banamex), the largest shareholder of Bansud, will act as a back-up servicer.
The transaction consists of two tranches, and a senior class of only $24 million was provided a national scale rating of raAA by Standard and Poor's. The junior class, consisting of $235 million, is fully subordinated and overcollateralized and received the lowest national scale rating of raCr from S&P, signifying the additional market risk. The certificates account for 90% of the subordination, as the total amount of the transaction is $360 million.
Although the deal went through a public offering system in order to be considered a capital market issuance, Banamex will be the sole buyer of the senior tranche and the deal is not open to investors at this time.
According to sources, unlike many deals that were in the pipeline before the end of 2000 and delayed as a result of economic conditions, this offering would have closed regardless of the economic situation. "The main purpose of the transaction was to improve the financial ratios. They were willing to close no matter what the economic conditions of the country were," the analyst said.
The deal has sparked a great deal of interest from market participants. Sources said they have received several inquiries from other Latin American banks regarding the criteria, subordination capabilities, and credit enhancement techniques for deals of this sort.