This is for the first time that Hudco will be raising such a high volume of funds through the securitisation route.

The public sector undertaking has also appointed a consortium of banks comprising ABN-AMRO, JM Morgan and Citibank as advisers to the issue.The pool of receivables will consist of revenues from infrastructure projects in the states and municipal bodies, according to sources in the corporation.

The float for securitisation of its infrastructure loan assets will be based on book-building exercise and the future cash flows from the float which are liquid on their own through repackaging will be transformed into marketable securities and sold to investors in the form of pass through certificate. The proposed security structure would be sold through special purpose vehicle or a creation of separate trust on the lines of National Housing Bank.

The financial institution is also believed to have appointed six arrangers for the issue comprising SBI-IDBI, DSP Merril Lynch, ICICI-ISec. HSBC-Arthur Andersen, PNB-IFCI and CB Richard Ellis.

However, ANZ Grindlays and Kotak Mahindra, though arrangers for the issue, are not part of the consortium, the sources maintained.

When contacted, the chairman and the managing director of the corporation, V Suresh said the company had earlier planned to enter the market with Rs 1,000 crore float but subject to the market forces and the response to the first round of placements, ``we shall carry out second tranche almost immediately and is in the process of mandating rating teams from Icra and Crisil to choose the pool of receivables, on the basis of which the placement will be made''.

He also indicated that over collateralisation-providing additional cash flows will act as a safety net for the paper in order to obtain possible rating but refused to divulge the extent of spread and coupon rate.

However, banking sources said Hudco would earn a spread ranging between 3 per cent to 4 per cent and entire structure will be worked out on a non-recourse basis that means the subscribers will have to entirely assume all credit risks associated wiht underlying cash flows.

Since the securitised paper is backed by assignment of cash flows, the floatation of the bond will be in the nature of a structured obligation.Besides, this is the largest asset-backed securitised issue in the country consisting of loan portfolio of sub-sovereign entities hence being treated as highly prestigious float.

The sources also divulges that the fees involved in such an advisory role is large and it is very difficult to ignore even by foreign banks, comprising a very large portion of their non-interest income portfolio.