Bemo Securitisation (BSEC) is now offering the first Structured Investment Vehicle (SIV) CLON-1 , the second Hybrid securitization on the Lebanese financial market. This product was structured by BSEC, and co-marketed by Financial Funds Advisors International.
CLON-1 is a Currency Linked Originated Note structure whereby an SIV issues 2 classes of notes, a Bull and a Bear (A), for a total amount of five million dollars. The Bull and Bear notes are inversely linked and have a one-year maturity; they pay nine percent or zero percent depending on the occurrence of a Trigger Event. This Trigger Event is defined as a certain level of exchange rate USD/LBP. The nominal value of a single note is $1,000 for both types.
SIVs are securitization vehicles set to benefit from certain “mismatchings” on currency, interest rates and commodities, whether on the same or on different markets. These instruments are a class of structured notes that represent a specific linkage to foreign exchange values or currency rates. The linkage entails relating the value of coupon payments or principal repayments to an identified currency. SIVs are a sub-class of the Asset-Backed Commercial Paper (ABCP) asset class.
In this specific case, the originator’s motivation stems from the very low rates paid on dollar deposits in the international market versus the rates paid on dollars in Lebanon. Given the low return on dollar deposits abroad and the balance sheet structure of Lebanese banks with respect to currency positions, it has become efficient for banks to hedge their currency position and maximize return on assets by using structured instruments. That is why Bemo Securitisation was asked to design tailor-made hedging solutions.
According to Bemo Securitisation director and vice-president Iyad Boustany, CLON-1 Bull and Bear structure adds value on the market place. It allows local banks to increase their exposure on local currency and at the same time hedge such an extra exposure at no extra cost by purchasing Bear Notes.
On the other hand, investors in the Bull Notes can benefit from a high return and a guaranteed principal. SIVs are the appropriate solution for the current market environment. Their interest is mainly the fact that they provide the originators and the investors with credit spreads while managing certain risks like the credit risk, the currency risk, the interest volatility, etc.
As for the Credit Risk, the proceeds of the sale of both notes will be deposited in a term deposit Guaranteed Investment Contract (GIC) with BEMO Bank who will guarantee the principal to each investor. From a credit risk point of view and according to MECG and Bilan Banques, BEMO ranks first in Lebanon in quality of earnings.
As a financial institution registered with Central Bank, Bemo Securitisation is an investment bank focused on a specialization in securitization, equity and credit derivatives, and cross-border structured finance. BSEC is a wholly owned subsidiary of BEMO Bank, dedicated to enhancing local and regional competitiveness and providing inexpensive stable funding for performing companies in stringent business environments. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
