OREANDA-NEWS. 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), reported the press-centre of  EBRD.


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.