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A secure line to funding

So far, Telecom Italia is the only telecoms company to make public plans to issue a securitized bond. It will raise up to Eu1 billion in the second quarter of 2001 by selling bonds secured on fixed-line customer bills.

       
Maarten Stegwee

For telecom companies tussling with rating agencies to preserve their investment credibility, it's an appealing prospect: a bond that can be sold at 20 to 30 basis points over Libor, that will never be downgraded and that could provide much needed working capital when conventional capital markets are all but closed. Securitization offers this prospect.


So far, Telecom Italia is the only telecom company to make public plans to issue a securitized bond. It will raise up to e1 billion ($907 million) in the second quarter of 2001 by selling bonds secured on fixed-line customer bills. According to bankers working in the area, however, it's on the to-do list of most of the big telecom companies. "It's a tough environment out there for telcos and that's where ABS [asset-backed securitization] comes in," says Maarten Stegwee, head of securitization at CSFB. Telecom companies are particularly well suited to ABS issuance, he says, because it is easy to understand their receivables.


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