Decision Nears on World's Largets ABS


Spanish banking circles are alive with rumors that what would be the biggest ever securitization an $8 billion deal to compensate Spanish electricity producers for so-called competition transition costs is set to be given the go-ahead.

The deal, which is being worked on by Morgan Stanley Dean Witter & Co., Banco Bilbao Vizcaya and Banco Centro Hispano, has been in limbo since early this year, after the European Union competition commission questioned whether such a deal would count as illegal state aid (ASRI 7/26/1999 p.2).

However, the E.U. may soon give the deal the all clear, after consultations between the Spanish government, the bankers and E.U. energy and competition authorities. Spain's energy director, Antonio Gomis, said that the E.U. would come to a final decision by the end of the year, though he refused to speculate on what the decision would be.

The deal is intended to compensate electricity companies for investments made before regulatory changes introduced more competition into the industry. If it goes ahead it will be backed by a levy on individual electricity consumers' bills.

The deal will be a major coup for the three banks, not least for Morgan Stanley, which will be able to claim back the title of underwriter of the biggest ever securitization, which it managed to let slip recently after Merrill Lynch & Co., BNP Paribas and Caboto won the mandate to underwrite the INPS transaction a E4.65 million ($4.68 million) securitization of delinquent pension contributions for the Italian state pensions body that Morgan Stanley structured along with Warburg Dillon Read and San Paolo IMI. (see story on page 9)

The stock of the major Spanish electricity producers rose during the week that the rumors began to circulate, in what one analyst called a "stampede" into the sector. Of the companies expected to benefit most from the securitization, Endesa's share price was up 4.42%, while Iberdrola gained 2.75% and Contabrico added 5.51%.