its second political risk insurance policy for a capital markets transaction.

The 12-year political risk policy covers up to 15 months of interest payments against the risks of currency inconvertibility and currency nontransfer.

Interest payments covered are on a $95 million securitisation of senior mortgage bonds on behalf of BACS (Banco de Credito y Securitizacion) 1 Mortgage Trust. The bonds are backed by US dollar denominated mortgage loans secured by residential properties in Argentina, and are part of the $115.8 million BACS 1 2001 issue of mortgage bonds.

The bonds achieved, through use of the insurance policy, an A1 rating from Moody's which is the highest rating that can be assigned to a cross border bond supported by Argentine assets and nine notches above Argentina's sovereign ceiling for Moody's.

Price Lowenstein, president and CEO of Sovereign, said: "We are pleased to have been able to assist BACS in achieving an investment grade rating on this transaction. This marks both a continued expansion of Sovereign's product development and a further evolution in the use of political risk insurance in the capital markets.''