Securitisation in the CIS Region - Using a Warehouse Structure for the Securitisation of Mortgage Portfolios Alex Medlock Head of Origination MNB Capital Markets C5 London, 12-13 October 2006
Dec 24, 2015
Securitisation in the CIS Region -Using a Warehouse Structure for the Securitisation of Mortgage Portfolios
Alex MedlockHead of OriginationMNB Capital Markets
C5 London, 12-13 October 2006
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Agenda
• Developments in the Russian Securitisation Market
• Principal Characteristics of a Warehouse Structure
• Structural Considerations• Case Study – City Mortgage Bank• Outlook
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What do Banks securitise?
• MBS – Residential mortgages– Commercial mortgages
• ABS – Auto loans– Consumer loans– Credit cards– Leases– SME loans– Future Flows
• CDO– Backed by loans or bonds
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2005 EMEA Securitisation – by asset class
CDO, 14.00%
CMBS, 13.00%
ABS, 26.00%
RMBS, 47.00%
Source: Moody’s
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Drivers – the housing finance market in Russia
• In EMEA RMBS accounts for over 50% of all issuance
• Housing market in Russia growing rapidly but still small and more or less doubling each year
• Less than 1% of GDP compared to 2-20% in other emerging markets and 40-70% in OECD countries
• IFC estimated medium term potential of Russian mortgage market equivalent to $10bn- $30bn
• Market dominated by Moscow and St. Petersburg but growing importance of regions
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Drivers – Why do Banks Securitise?
• Optimise Funding
• Risk Management
• Capital Management
Access to a new Investor base through higher rating and different asset class
Reliable and competitive funding Liquidity Management Term Funding
Transfer of risks associated with pool of loans
Manage interest rate and credit risk
Release of regulatory capital Improve ROE
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Russia - the story so far….
Gas export receivables - USD 1.25bln issued Jul 2004 - Maturity: Feb 2020. Priced at 7.201%. RegS/144a. Rating: BBB-
Offshore credit card receivables - USD 225m issued Oct 2004 – Maturity: Nov 2009. Priced at 9.75%
Auto loans USD 50m issued July 2005 – Maturity: July 2010. Coupon: 1m Libor plus1.75%pa. Rating Baa3
Residential Mortgages USD 50m Warehouse 1 year Loan Facility – Nov 2005
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Russia - the story so far continued
Consumer Loans - Phase I €126.5 m (Phase II €164.5m to be placed during the nine months from closing). Issued Dec 2005Maturity Dec 2012. Coupon: 1m Euribor plus 2.5%pa
Consumer Loans - €300m in 3 classes – A1 (€228m), A2 (€39m) and B (€33m).Issue April 2006 – Maturity January 2012. Coupon:1m Euirbor plus 1.65% Rating Class A1 Baa2
Diversified Payments Rights – $300 m. Issued March 2006. Maturity March 2011. Coupon: 3m Libor plus 1.60%. Rating Baa3
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Russia - the story so far continued
• In June 2006. VTB, as the originator and the servicer, completed the first Russian RMBS deal in the total amount of US$ 90m. The senior notes were assigned A1 by Moody’s, and BBB+ by Fitch. Coupon - 1-m LIBOR + 1.00% p.a.
• In August 2006 MNB Capital Markets and Greenwich Financial Services concluded the second RMBS issuance in Russia. At the same time, it was the first Russian RMBS transaction carried out in accordance with Rule 144A, which enables qualified US investors to purchase these securities. The senior notes were assigned Baa2 rating by Moody’s. Coupon - 1-m LIBOR + 1.60% p.a.
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SPV
Issuer Borrower
BANKS
Originator
Obligors
Hedge Counterparty
Cash
Manager
Paying
Agent
Corporate
Servicer
Liquidity
Facility
Trustee
Standby Servicer
Asset Data Custodian
Typical Warehouse Structure
Collections
New Mortgage
Contracts
Receivables
Proceeds
USD
Receivables
Proceeds
USD
Class A Loan
USD
Interest Rate and FX Swaps
Subordinated
Loan
Russia Offshore
Mortgage Contracts sale
Receivables
USD
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Structuring Considerations
• Investors
• Structure
• Rating• Legal Opinions• Size• Collateral• Type of Offering
Credit Enhancement FX Liquidity
Public V Private Listing RegS/144a
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Case Study – City Mortgage Bank
Originator & Sevicer: City Mortgage BankIssuer: City Mortgage MBS Finance B.V. (Netherlands)
Transaction Type: USD denominated Mortgage-Backed Sequential
Capped Floating Rate Pass-through Notes
Status of the Notes: Direct, unconditional, secured obligations of the
issuer
Pool Size: USD 72.6m (Senior Class A Notes – USD 63m)
Coupon: 1 – month LIBOR plus 1.60% p.a.
Listing: Irish Stock Exchange
Arranger: Moscow Narodny Bank Capital Markets and
Greenwich Finance Services LLC
Syndicate: RZB Austria (senior co-lead) Banco Finantia (co-
lead)
Lead Managers Counsel: Allen & Overy
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Deal Structure
Issuer:City Mortgage
MBS Finance B.V.
TrusteeBank of New York
Stichting100% of Share Capital
Back-up Servicer:ZAO Raiffeisenbank
Originator:City Mortgage Bank
InvestorsCash Manager:
Bank of New York
Servicer:City Mortgage Bank
Security Security
Notes
Sale of mortgagesCollections Servicing
Fee
ServicerReports
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Capital Structure
• Senior/Subordinated Notes paying sequential• Credit enhancement mainly through subordination of the Class B
and Class C notes plus Reserve Fund• Expenses Contingency Fund
Class A Notes
Class B Notes$6.29 M B1
Class C Notes$3.14 M
Class AFL
$63.1 M Baa2
Class AIIO
Inverse IO
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Collateral Summary
Receivables: Russian Law Mortgage Certificates (“Zakladnaya”) Loans to private individuals secured by mortgage over residential properties
Number: 1,274Outstanding Balance: USD 72.6 millionGeographic Diversity: Moscow, St. Petersburg, Moscow Region,
Nizhniy and SamaraWA Original LTV: 64.89%WA Current LTV: 61.83%WA Seasoning: 0.8 yearsWA Loan Size: USD 56,955Arrears: No loans > 1 monthStatic/Revolving: Static
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Placement
UK37%
USA37%
Southern Europe
10%
Western Europe
16%
Distribution by RegionType of Investor
The notes are rated by Moody’s and were placed in a number of jurisdictions with a variety of investor types as illustrated below:
Commercial Banks63%
Asset Managers
Funds37%