Baker & McKenzie has completed six Russian mortgage securitizations over the last five months, raising over RUB40 billion in investor funding and representing 75% of all mortgage securitizations done in Russia since 2012.
Mortgage securitizations have been done for a number of Russian banks and have included both debut issuers (Absolut Bank, Nomos Bank, Investtradebank and Asian Pacific Bank), and repeat issuers (VTB24 Bank and DeltaCredit Bank). Both covered bonds and RMBS were issued, all receiving an investment grade rating from Moody’s and a rating uplift up to 5 notches. The notes were placed with Agency for Housing Mortgage Lending (AHML), VEB and market investors. Baker & McKenzie acted as deal (transaction) counsel on these deals.
“We are very pleased to have assisted our clients with such complex deals,” said Vladimir Dragunov, partner and head of the Russian Structured Finance Practice at Baker & McKenzie, Moscow. “These deals were completed over a short period of time. They demonstrate the ability of our team to execute several complex deals simultaneously. Our team’s experience makes it possible to do securitization transactions quickly and to the very highest standards.”
The most recent deal, completed in April 2013, was the RUB10 billion debut mortgage securitization for Absolut Bank. The notes were rated Baa3 by Moody’s and were placed with market investors. This was the first mortgage securitization done in Russia in 2013, and the deal, which was placed with various investors in the market, attracted substantial investor interest and was oversubscribed by RUB1 billion.
In December 2012, VTB24 Bank completed a RUB18.6 billion securitization of its mortgage portfolio, which it had purchased from KIT Finance Investment Bank. The deal involved complex and innovative servicing arrangements. This is the largest and one of the most sophisticated domestic securitizations of mortgage loans since the world economic downturn.
In November and December 2012, Baker & McKenzie completed three deals with Nomos Bank, Investtradebank and Asian Pacific Bank. All three were debut mortgage securitizations for these banks; they were placed under the AHML program for the purchase of mortgage-backed bonds, enabling them to receive long-term financing at the fixed rate of 8,75% p.a.
In November 2012, DeltaCredit Bank completed its RUB5 billion domestic covered bond transaction. This is the first-ever covered bond transaction in Russia to receive a rating above the credit rating of the issuer (guarantor). Covered bonds were rated Baa1, which is two notches above the credit rating of the bank. The rating takes into account the structure of the transaction, the credit strength of the bank, and the value of the cover pool in the event of the bank’s default, as well as some of the strengths of Russian law No. 152-FZ, On Mortgage Backed Securities, dated 11 November 2003.
“Recent mortgage transactions have demonstrated that mortgage securitization as a funding tool is available not only to the big banks, but to smaller banks as well,” Mr. Dragunov adds. “The deals were mostly placed with domestic investors, although several international investors were also involved. We would expect this trend to continue in 2013 but would also expect some international RMBS and structured covered bonds to come out of Russia.”
The Baker & McKenzie team included partner Vladimir Dragunov and associates Sergey Samokhvalov, Olga Ehrman and Maxim Temchuk.
