LATIN DEALS COMING, DESPITE ECONOMY


While some are bracing for a recession in Latin America, there is talk of several deals hitting the securitization market during the summer and early fall. The International Monetary Fund said a few weeks ago that it expects the overall Latin American economy to remain sluggish for the remainder of the year, yet that prediction could prove advantageous for future-flow transactions that allow issuers to tap markets where there is more liquidity.

Brazil's CVRD, one of the largest iron-ore companies in the world, is finally getting closer to launching a deal that has been in the works for quite a while now, a source said.

The company plans to raise $300 million to $500 million on international capital markets through a securitized bond. The deal was mandated to Banc of America Securities six months ago, the source said, but CVRD has taken its time to finalize details. Nevertheless, the deal should come to market before the end of the summer.

Petroleos Mexicanos (Pemex), Mexico's largest oil exporter, is moving ahead with a $1.5 billion securitization. Morgan Stanley Dean Witter will lead the Rule 144A offering, which will be split into three tranches with final maturities of roughly 15, 18, and 27 years. Morgan Stanley plans to start shopping the transaction this week, with pricing expected by the end of June.

The deal will be rated Baa1 by Moody's, BBB by S&P, A by Fitch and A by Duff. The collateral will consist of receivables from Pemex's crude oil shipments to North American clients. Since only a handful of refineries are capable of processing the oil, investors will be able to closely scrutinize their credit quality. The transaction's structure is expected to mirror a $1.1 billion securitization that Pemex conducted in February

Although Pemex has been ready to issue for some time, the deal was put on temporary hold because of the market instability that followed fears of an interest hike by the U.S. Federal Reserve, a source said. However, most of the nervousness has now dissipated, he added, and the deal is ready for launch.

In addition, Empresa Brasileira de Aeronautica, an aviation manufacturer, is preparing its first asset-backed deal a $200 million issue backed by expected aircraft sales to American Eagle, a subsidiary of American Airlines. The deal will finance the development of a new series of 70- and 90-seat aircraft. Salomon Smith Barney and Chase Securities are managing the deal, which is not expected to come to market until late this summer.

Meanwhile in Argentina, private water utility Aguas Argentina S.A is laying the groundwork for a securitization of its domestic receivables. Details on that transaction are not yet available. Also, Argentine housing lenders BHN and Banco de Galacia are expected to float mortgage-backed issues this summer

Argentina is also about to see yet another airline-ticket receivables deal led by Citibank: Condor, a $100 million transaction for Aerolineas Argentinas S.A., which is expected to be launched in the local market in the next couple of weeks. The deal is similar in structure to the company's $150 million securitization program, Aerocard, which was launched by Citibank in 1997. Like the Aerocard offering, Condor is backed by future airline ticket sales in the U.S., Europe, Asia and Australia charged on credit cards only.

Credit-card deals are the latest trend in Argentina's securitization market. "Though credit-card deals might not be very impressive in terms of volume, they are significant because of their more complex structure," said Javier Merighi, an ABS analyst with Fitch IBCA in Buenos Aires. According to Merighi, the reason behind the complexity of such transactions is the fact that credit-card payments have a weak guarantee in Argentina. "There is a need to implement all kind of bells and whistles in these transactions to make them safe. The result is highly complex structures," he explained.

The Condor deal will be marketed to local investors, with a local investment-grade credit rating. "The credit rating wasn't higher because the offering is closely tied to the risk involved in Aerolineas Argentinas," said Merighi.

Another credit card deal that will soon be in the Argentinean local market is a $30 million transaction for Tarjeta Naranja. In addition, the province of Santiago del Estero is said to be on the brink of issuing an $80 million securitization of co-participation tax revenues. The notes have a seven-year maturity and received a preliminary foreign currency rating of double-B-minus from Duff & Phelps.

Meanwhile, in Peru, Telefonica del Peru is mulling the structure of its next deal, which will be managed by Merrill Lynch and J.P. Morgan. The company may consider taking advantage of higher local-currency ratings by securitizing some of its existing unsecured receivables, rather than expected receivables. But it is still most likely to stick with the usual type of securitization, based on future cash flows. The company conducted such a transaction in early December, just before the market cooled on Latin America issues. - TH/Savita Iyer