The Baltic country of Latvia has a cross-border RMBS in the works for about $63.6 million, the first of its kind in Central Europe, according to a report by Moody's Investors Service. Wachovia Securities is the arranger, according to a source familiar with the transaction. Moody's has given preliminary ratings of 'Aa2' to a senior tranche - sized at $60.1 million - and 'Baa1' to a subordinated piece ($3.6 million), both with projected legal final maturities of 22 years.

The originator is the Baltic American Enterprise Fund (BalAEF), a US private corporation that was initially controlled by the U.S. government. "[Its] mission is to promote the development of a market economy - and specifically a mortgage market - in the Baltic Region," Moody's said. BalAEF's headquarters are in the Latvian capital of Riga.

Among the deal's enhancements are political risk insurance (PRI) from the Multilateral Investment Guarantee Agency (MIGA); the role of Latvijas Unibanka as back-up servicers; and subordination. Political risk insurance protects investors from payment blockage caused by government-imposed capital controls, such as restrictions on overseas currency transfers.

While Latvia continues to use the lat as its national currency, there is no denomination mismatch between the underlying collateral and the bond, as the mortgages are all in U.S. dollars.

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