Magazine article American Banker

Banks Joining Parade of Buyers of Asset-Backed Paper from Third World

Magazine article American Banker

Banks Joining Parade of Buyers of Asset-Backed Paper from Third World

Article excerpt

Banks are joining insurance companies and pension funds as buyers in the fledgling market for asset-backed securities from emerging nations.

"Commercial banks are having a tremendous appetite for buying these instruments," said Fernando Guerrero, who puts together emerging market offerings at BT Securities Corp., the investment banking arm of Bankers Trust New York Corp. He declined to name banks, but said they have been investing in unrated deals with little collateral to support them.

About $8 billion of asset-backed securities have been orignated in Latin America and other developing regions this year. Such issues are gaining in popularity because they carry yields of 200 basis points or more over the London interbank offering rate.

Unlike American securitizations, in which companies offer investors a stake in income-producing assets, many unrated Latin American deals are backed by "future flows" - from assets companies have not yet sold or manufactured. "In this sense, the deals are more like loans than securitizations," said Thomas McCormick, managing director at Financial Security Assurance, a company that insures the securities.

Investment banks have begun offering future flow deals more often in recent years as Latin American governments privatize industries and companies seek capital.

Dealers say the risks in the future-flow deals are limited; the offerings are often small - $200 million or less - and short in duration. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.