Audi Saradar Investment Bank has created a Special Purpose Vehicle, the Lebanese Asset-Backed Notes Inc, incorporated in the British Virgin Islands, on 15 December 1997. The purpose of this SPV is to issue Senior / Junior Notes with underlying assets of Lebanese Treasury Bills or Certificate of Deposits. Twenty Six Series have been issued under the Senior / Junior Program till June 2002, with aggregate values in excess of USD 1,180 million.
The Senior / Junior Notes Program is structured under New York law. Audi Saradar Investment Bank acts as Arranger, Servicer, and Placement Agent, and the Bank of New York acts as Trustee, and Paying Agent.
The Issuer (Lebanese Asset-Backed Notes, Inc.), through ASIB, converts proceeds from the sale of Notes into LBP and uses these funds to purchase, LBP-denominated Treasuries of the Lebanese Republic. At the Notes' maturity, the Issuer will have the Lebanese Pound proceeds from the underlying Treasuries converted back into US Dollars at the then prevailing market rate, subject to availability, and paid back to the Noteholders.
The Notes, denominated in US Dollars, are deliverable through Euroclear or Clearstream (Cedel), and are divided into two categories:
Senior Note: a coupon-bearing instrument that is protected against possible fluctuations of the LBP/USD exchange rate from 20 up to 100%, depending on the Junior/Senior leverage. These Notes earn interest at the coupon rate and have priority of payment from the total USD proceeds available at maturity.
Junior Note: a zero-coupon leveraged instrument that is sensitive to possible fluctuations of the LBP/USD exchange rate. These Notes bear no coupon and are entitled to all the remaining USD proceeds after the Senior Notes have been paid. The higher the appreciation of the LBP, the larger the remaining USD proceeds are expected to be, hence the Junior return, and vice versa.