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Deutsche Bank and Merrill Lynch are preparing to launch the second Portuguese deal of the year with a Eul.lbn collateralised bond obligation for three Portuguese banks and asset managers.
Banco Comercial Portugues, Espirito Santo Fundos de Investimento Mobilario (ESAF) and AF Investimentos Gestao de Patrimonius (AFI) will provide a portfolio of 117 credits, combining Portuguese bonds and Eurobonds.
The first Portuguese CBO to include Portuguese debt was Cabral No 1 - a Eu261.2m securitisation launched for the asset management arms of two domestic banks by Credit Suisse First Boston in February.
The regulatory environment in Portugal presents several obstacles to securitisation, especially where domestic assets are involved.
Portuguese bonds are subject to a 20% withholding tax if the investor is not registered in Portugal, and as a result many previous deals have avoided domestic bonds.
This deal's structure, which is similar to Cabral No 1, reduces this problem by first selling the bonds to a Portuguese bank before transferring the economic benefits to the SPV.
Interest on bonds issued by a Portuguese institution is...