Venezuelan utility Genevapca is preparing a $150 million 10-year securitization via Banco Santander Central Hispano and hopes to issue the debt before year-end. The bond will monetize off-take agreements between the power producer and its principal client, state-owned oil company PDVSA.

Zurich Emerging Markets Services may be providing transfer and convertibility coverage for the bond as well as a $40 million non-honoring insurance policy to protect against a missed payment by PDVSA. This explains the rumors that PDVSA was looking for political risk insurance (PRI) for a capital markets transaction.

Bankers arranging PRI-backed deals have typically gone to Moody's Investors Service or Fitch for ratings because of their relatively positive take on the product. But this time around, BSCH is also hoping that Standard and Poor's will grant the deal an investment-grade rating thanks to the use of a de-facto securitization and the non-honoring coverage.

Nevertheless, the issuer will likely need 24 months of PRI rather than the usual 18. Premiums for the coverage will probably be in the 300 basis point to 350 basis point range, higher than for corporates elsewhere in the region due to the unpredictable nature of President Hugo Chavez's policies.

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