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First Securitization Deal Under Russia’s New Law
23.06.2015 12:00 / MIFC
The originator (Credit Europe Bank Ltd.) transferred a portfolio of car loans, amounting to 12.5 billion rubles, to the issuer (SFO Europa 14-1А LLC). As a result, the market was offered a new product, i.e. bonds with car loans as collateral.
The issuer issued two tranches of bonds: Class A bonds (senior tranche) and Class B bonds (junior tranche) secured by the pledge of the same collateral: car loans and the issuer’s rights under the bank account agreement. The issuer’s obligations under the junior-tranche bonds are to be performed after and subject to the performance of the issuer’s obligations under the senior-tranche bonds.
The Class A bonds have been assigned an investment grade by two international rating agencies: Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s.
The issuer placed the senior-tranche bonds with a total nominal value of 7.8 billion rubles on the Moscow Exchange. The demand for the Class A bonds substantially exceeded the placement amount.
The junior-tranche bonds, as is customary in securitization transactions, have been placed to Credit Europe Bank Ltd. by private subscription, which, on the one hand, provided credit enhancement to the senior-tranche bonds creditworthiness, and, on the other hand, ensured compliance with the legislative requirements related to the originating bank taking on the risks.
This securitization was the first one to use pledge accounts opened with several banks, testing a complex collateral pool structure (“revolver”), to provide for a mechanism of accelerated bond amortization subject to terms as defined by the issue documents, to develop a unique system for monitoring compliance over the main parameters of the securitization.
The Banking & Finance, Capital Markets Team at Egorov Puginsky Afanasiev & Partners acted as legal counsel on the deal.
“We believe that this pilot transaction will be followed by other placements of bonds with consumer loans, SME loans, shared construction, leasing or factoring agreement claims and other financial assets used as collateral”, says Head of Banking & Finance Dmitriy Glazounov.