In an important move for Russia’s capital markets aimed at giving local private banks access to longer-term money and diversifying their sources of funding, the EBRD today committed up to US$ 50 million through a structured debt instrument to ZAO Raiffeisenbank, the Russian subsidiary of Raiffeisen Bank International (RBI).
The transaction saw the Bank invest in seven-year bonds indirectly secured by pledges of ZAO Raiffeisenbank’s current and future US dollar and euro receivables, known as Diversified Payment Rights (DPRs).
The US$ 50 million invested by the EBRD contributes to a wider funding drive. It involves other international institutions including the IFC (International Finance Corporation) and is arranged by RBI and WestLB.
The bonds were issued through a private placement made for the Bank by Roof Russia DPR Finance Company S.A., a special purpose company incorporated in Luxembourg.
This is the first such operation by a private Russian bank since the beginning of the financial crisis and re-introduces asset-backed financing instruments onto the Russian market. The EBRD completed six structured deals in Russia before the crisis but this is the Bank’s first in the country to be secured on future cash flows.
The structure will allow ZAO Raiffeisenbank to reduce its reliance on client deposits and funding by its parent RBI at a time when both local and international markets are under stress and raising longer-term funds is challenging. The funds raised by this EBRD investment will also enable ZAO Raiffeisenbank to expand its mortgage lending business in Russia. In 2011 the annual volume of mortgage lending in Russia leapt to a record 713 billion roubles (US$ 24 billion), an 87 per cent rise over the previous year. However, mortgages play a far less important economic role in Russia than in the European Union, accounting for only 2.75 per cent of nominal GDP in the country against a 52 per cent average for EU countries.