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EBRD backs groundbreaking securitisation of Russian residential mortgages
Important test for fixed-rate Rouble-denominated residential mortgage loans
The European Bank for Reconstruction and Development has acquired 264 million
Roubles (equivalent to 7.5 million Euros) of mortgage-backed bonds (Class B
Bonds) issued as part of a ground-breaking deal involving the securitisation
of residential mortgages by Russia’s state-owned Agency for Housing Mortgage
Lending (AHML).
The transaction, registered with the Federal Service for Financial Markets of
the Russian Federation, is Russia’s first tranched and publicly-placed
mortgage securitisation issued via a Russia-domiciled special purpose vehicle.
The tranched structure was made possible by changes to the Russian Law "On
Mortgage Backed Securities" passed in July 2006. The transaction represents an
important test for the viability of Rouble-denominated financing involving
mortgage-backed securities (MBS).
The transaction involves three classes of bonds, at a total face value of
about 3.3 billion Roubles (94 million Euros), issued by “First Mortgage Agent
of AHML,” a special purpose vehicle domiciled in Russia. Citi acted as the
mandated lead arranger and sole book-runner. The Class A Bonds, representing
over 80 percent of the transaction, will be placed with Russian and foreign
institutional investors and listed on the Moscow Interbank Currency Exchange
(MICEX). The Class C Bonds will be retained by AHML.
The Class B Bonds were acquired by the EBRD. AHML’s intention in securing the
EBRD’s participation is to enhance investor confidence in this important debut
MBS transaction.
AHML is one of Russia’s largest re-financers of residential mortgage loans.
Its aim is to build a system for refinancing mortgage loans originated by
regional banks and other agents so as to help greatly increase access to such
housing finance in Russia. Although currently the volume of mortgage loans in
Russia at only 1.3 percent of GDP remains small in absolute terms, the market
for such loans has been growing quickly in recent years.
Even though this MBS transaction involves the securitisation of only a small
proportion of AHML’s mortgage portfolio, it will provide needed funding for
ongoing mortgage refinancing operations. By establishing this MBS programme,
AHML aims to promote development of domestic MBS markets and to create a
cost-effective MBS platform which it, as well as other Russian issuers, can
replicate.
Jonathan Woollett, EBRD’s Director of non-banking financial institutions,
called the transaction a model for other banks interested in issuing
Rouble-denominated mortgage-backed securities. The EBRD views AHML as having
an important role to play in enhancing the liquidity of mortgage loans by
setting unified standards and popularizing a new asset class with investors,
Mr. Woollett added.
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