Russia and Turkey generated news last week in three different asset classes: mortgages, credit card receivables and diversified payments rights (DPRs).
On the mortgage front, more details have emerged from Russia on an upcoming RMBS from Vneshtorgbank (ASR, 02/13/06). The buzz is that the transaction is taking longer than initially expected, at least by those observers who had glommed on to overly optimistic statements about timing made by the originator. "VTB has had to grow its book," said a source familiar with the transaction. "It's only this year that they have the collateral." Led by HSBC and Barclays Capital, the entire deal is planned at $90 million. The International Finance Corp. is expected to provide a liquidity facility that will help protect against sovereign interference. The structure will also feature an interest rate swap since the bond is expected to be a floater, while the underlying collateral is fixed-rate.
Also in Russia, a $300 million credit-card deal from JSCB Rosbank received an upgrade. Fitch Ratings bumped up Russia International Card Finance to BB-' from B+', following an upgrade in the originator's issuer default rating and a consequently stronger going concern assessment. Monthly collections for the transaction, which was lead by Merrill Lynch, have oscillated between $30 million and $50 million, handily exceeding the three-month maximum debt service of $22.9 million, according to a Fitch report. The deal has a legal final maturity of September 2010 and was issued for $225 million in November 2004, only to be re-opened in February 2005 for $75 million. Moody's has maintained its Ba3' rating on the deal.
On the DPR front, Turkiye Vakiflar Bankasi (Vakifbank) was timed to go on roadshow last week via leads Standard Chartered and WestLB with an $815 million deal, broken down into five tranches (ASR, 05/29/06). The deal is 144A- and Reg S-registered. Moody's Investors Service and Standard & Poor's gave a triple-A rating to the $150-million A tranche, $250-million B tranche, and $200-millon D tranche on the strength of sureties provided by FGIC, MBIA and Ambac, respectively. The C tranche, totaling $115 million, received a Aa3' from Moody's and AA' from S&P, mirroring the ratings of Radian, which wrapped that piece. The respective ratings for $100 million in unwrapped notes are Baa2' and BBB-'. All tranches have an eight-year final/5.8-year average life, except for the A piece, which bears a seven-year final/5.2-year average life.
In 2005, Vakifbank processed $5.8 billion in non-Turkish DPR flows, which correspond to international financial operations initiated offshore such as exports and worker remittances. That figure was a 35% surge from the $4.3 billion flowing in 2004, which, in turn, marked a 13% rise from 2003. Turkish flows stem from domestically generated payment orders linked to the offshore clearing and settlement of foreign currency funds among Turkish parties. In calculating debt service coverage ratios, S&P excludes the Turkish flows from its stress scenarios because of their heightened volatility and exposure to changes in Turkish currency regulations. Moody's gives reduced credit in making calculations of its tested collections debt service cover ratio.
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