BNP Paribas ready to launch Pacific Liberté $1.2 billion synthetic CLO

BNP Paribas is poised to launch a $1.2 billion, three-year synthetic balance sheet collateralised loan obligation (CLO) called Pacific Liberté, possibly as soon as this week or next, according to market sources.

The transaction is based on the French bank’s loan portfolio in the Asia-Pacific, including Japan, Australia and New Zealand, sources indicated.

BNP Paribas is said to have already pre-placed most of the deal and hopes to close it soon, with a payment date expected for the end of June.

The deal is being sold privately and the ratings assigned by Moody’s Investors Service will also remain private. Officials at Moody’s declined to comment.

Guillaume Dieu, the French bank’s Hong Kong-based head of Asia-Pacific synthetic securitisation, also declined to comment.

The unfunded super-senior tranche - a credit default swap - is expected to be at least $1 billion. The balance of about $200 million will comprise five funded tranches rated triple-A, double-A, single-A, triple-B and double-B and an unrated equity tranche. BNP Paribas is expected to keep the double-B and the equity tranches, sources said.

The bank has been working on the deal since last year, when an initial launch was planned for mid-year. After successive tentative launch dates, name changes and structure modifications, the deal seems to be finally on track in its current form and name.

Sources declined to comment on specific details of the transaction’s latest form, but an earlier structure, when the deal was called Asia Pacific CLO, included loans from Japan, Australia, New Zealand, Hong Kong, China, Taiwan, South Korea, Thailand and Malaysia. At the time, the portfolio achieved a diversification score of 70, which, experts said, is very high.

According to securitisation specialists, BNP Paribas’ synthetic CLO will likely offer buyers, such as banks, the opportunity to get exposure to Asian risk without having to set up an infrastructure or to build up client relationships in the region. This is similar to a structure by the Development Bank of Singapore that offered Singaporean loan exposure to participants that bought its Alco 1 synthetic CDO late last year.

BNP Paribas has structured and closed several synthetic balance sheet CDOs based on its corporate loan portfolio in recent years, including a €3.25 billion seven-year EuroLiberté synthetic CDO, which closed in March 2001. EuroLiberté was based on the bank’s European exposure outside France. The structure was considered by market participants as very innovative.