Posted By: Janine Delacroix

By Paul J Davies and David OakleyWed Nov 8, 2:20 PM ET

HBOS, the leading UK mortgage bank, is set to launch the first US dollar denominated mortgage backed covered bond after appointing Citigroup (NYSE:C - news) and Deutsche Bank (NYSE:DB - news) to lead the sale.
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The deal will be the first to test US investor interest in an instrument that is new to their market following the recent arrival of the first US issuer of covered bonds in the European markets, Washington Mutual (NYSE:WM - news).

Covered bonds are secured against pools of mortgages or public-sector loans, but investors also have a claim against the issuers balance sheet, making them one of the safest, highest rated issues in the fixed-income markets.

It is a curiosity of covered bonds that once institutions in a new jurisdiction begin issuing such deals, investors in those countries begin to invest, bankers say.

HBOS will be hoping to prove this is the case when it sells an expected 5-year benchmark deal, which means at least $1bn, according to one of the banks involved, in the coming weeks.

However, the issue could also appeal to investors from other jurisdictions such as Asia, which are flush with US dollars.

A British telecoms provider has launched a $100m bond to open up the African mobile network in a landmark deal aimed at significantly increasing the number of users on the continent by 2010.

The bond from Gateway Communications is the first ever high-yield issue from a European company designed to develop Africa's technological infrastructure.

Julian McIntyre, Gateway's chief treasurer, said: "The deal was many times oversubscribed with the money raised from a mixture of European high yield investors and emerging market names that see this as an interesting growth market."

Gateway, which provides satellite technology to connect 85m mobile users in 28 African countries, says there is huge potential for growth in Africa where penetration rates are low compared with other emerging markets.

The company has played a big part in raising the number of users from 65m in 2000 to 134m in 2005 out of the continent's 915m people.

The seven-year bond, which cannot be called for four years, was priced at par with a coupon of 9.875 per cent.

The bond is rated B by Standard & Poor's, five notches below investment-grade status, while Moody's Investors Service rated it B3, a notch lower.

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