Last week, Fitch Ratings upped the rating on the only outstanding future-flow credit card deal from Russia, an initially $300 million issue from Rosbank. The boost spanned five notches, taking the deal to ‘A-' from ‘BB'. It came two weeks after Moody's Investors Service elevated its rating on the deal to ‘Baa3' from ‘Ba2'.

The upgrades followed Societe Generale's move to exercise a call option for 30%, plus two shares, of the Russian bank. This gives SocGen a controlling interest of 50%, plus one share.

While an unambiguous positive for the transaction, the upgrades have served only to highlight how barren the sector has been, and may well continue to be, in Russia.

The bank remains a leading generator of these receivables, but Rosbank Managing Director Anton Pak said Rosbank has no plans to issue more transactions backed by credit cards, whether linked to offshore receivables generated by foreign visitors - as in the outstanding transaction - or onshore ones in the traditional mold of U.S. credit card deals. By Jan. 1, Rosbank had issued 3.4 million cards.

A source familiar with the sector said that at least two Western banks are warehousing Russian credit card receivables. But public market deals, particularly in the current environment, don't appear to be on the horizon.

Although SocGen's purchase of controlling interest was at the root of the upgrades, the transaction has been performing solidly as well. Over the last year, the monthly collections have stood at about three times the maximum debt service of $22.9 million, while the debt service coverage ratio was at nearly 10-to-1 in June, more than triple the trigger level of 3-to-1. Both indicators have improved over the last two years.

Currently, about $106.4 million is outstanding on the notes, which mature in 2009. Merrill Lynch led the issue, which amounted to $225 million in November 2004. In February of 2005, the company re-opened the transaction for another $75 million.

While Rosbank isn't planning any more ABS action on the credit card front, the bank is considering deals backed by car loans and mortgages, Pak said.

(c) 2008 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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