Chase Manhattan Corp.'s investment banking arm, making a big push for business in the world's emerging markets, is proving you can package almost anything into a security.
Among the more unusual offerings is a deal backed by anticipated Philippine Airlines ticket sales, in which Chase is securitizing assets not yet on the client's books. Sources said that investor interest in the Philippine offering, which came to market last month, has been so strong that it has been expanded to $75 million from its original $50 million.
Offerings by Chase Securities Inc. to be priced next week include a $100 million securitization backed by paper pulp exports from Companhia Suzano of Brazil and a $150 million deal backed by remittances to Banamex, a Mexican bank.
These deals reflect growing investor interest in emerging market securitizations, as well as Chase's eagerness to join Citicorp, J.P. Morgan & Co., ING Barings, and Merrill Lynch & Co. as a major organizer of these offerings.
"We've been particularly busy since the merger with Chemical Bank, and we've created a significant market," said Michael J. Malter, managing director and group head of global asset-backed securities at Chase.
He said the company now has seven staff members who develop securitizations with business clients from Latin America and Asia. Chase expects to place $600 million of private emerging market securitizations this year, he added.
More than $8 billion of private emerging market offerings have been issued industrywide this year, Mr. Malter said, up from only $1 billion in all of 1994.
Unlike U.S. securitizations, in which a receivable on a company's books but not yet collected may be offered for sale, emerging market securitizations frequently involve assets a company does not yet have.
Such securities fall "between a revenue bond and a typical American securitization," Mr. Malter said.
The Philippine Airlines deal, which has not been evaluated by bond rating agencies, involves tickets the company has not yet sold.
That sets a precedent, said David Tesher, a director at Standard & Poor's Corp. who rates new asset classes. An earlier ticket securitization by Northwest Airlines involved trips that had been sold.
"The typical transaction involves securitizing tickets that have been generated to a passenger," Mr. Tesher said. "The risk lies in the performance of the flight, that it might not fly due to a strike or some other reason."
Chase's offering, which assumes that people will buy enough tickets to support the securities, "clearly is pioneering," he said.
Despite the riskiness of emerging market deals, their high spreads seem to be attracting investors.
A source at Chase said the emerging market deals currently being shopped to investors offer as much as the London interbank offered rate plus 225 basis points, a much greater yield than a typical North American securitization that may offer only 10 basis points over Libor.
