BSEC and BLC co-lead largest securitization deal

Notes worth $185 million raised for Solidere

Solidere has completed a $185 million mortgage-backed securitization transaction lead arranged by BLC Bank and BSEC (Bemo Securitisation). The transaction constitutes the largest ever asset-backed issuance in the local capital markets. Solidere plans to use the raised funds to provide part of the needed financing to continue with its real estate development activity and infrastructure on the waterfront.

The transaction involved setting up a securitization fund, ‘Beirut Central District 1’, for liquidating a portion of Solidere’s land sales receivable portfolio which represents financing it had granted to its clients. “The fund bought from Solidere debt owing to it on properties it sold since up to three years ago,” said Ronald Yazbeck, General Manager of BSEC. The fund then resold these debts through three tranches of securities: Class A of $130 million which was subscribed by local banks, Class B of $45 million which was retained by Solidere but may be resold after the redemption of Class A securities, and Class C of $10 million retained by Solidere for the whole life of the transaction.

“Around 30 percent of the fund notes are held by the issuer (Solidere) which offers an additional guarantee for note holders,” said Yazbeck. Class B notes will be re-injected in the market after the Class A securities are redeemed. Investors in Class A notes will get a fixed yearly coupon of five percent, over a duration of 1.3 years. The expected final maturity of Class A notes is two and a half years.

Banks that invested in the securities have the liberty to resell the notes to their clients through the secondary market. The realty security is worth at least twice the value of the investment made by the banks. “While structuring the deal, we gave a lot of consideration to the security package offered to investors. The Solidere brand name, combined with solid credit protection levels are behind the successful setup of the financial structure,” said Yazbeck.

The mortgage-backed securitization represents a new investment tool for the local market, a change from the government Eurobonds and the notes issued by banks. Besides being a secure investment, coupons offered on the mortgage-based notes are attractive for investors, Yazbeck said: “Banks offer a maximum of around 4 or 4.5 percent on notes of duration 1.5 years at best.”

The fund is authorized by the Central Bank. The legal counsels for the transaction are Nasri Antoine Diab Law Firm and Abou Jaoude and Associates Law Firm.