Emerging markets at the Global ABS conference in Cannes took up a sliver of the schedule - in three and a half days of talks, only three panels were dedicated to EM, and two of those dealt exclusively with Russia.
Yet there were certainly enough leading players on the origination and arranging sides to take the temperature of the Russian securitization market, and I'd say it's getting warmer.
That's not to say that investors in the West - the ones that Russian originators still depend on thanks to a shallow and yield-chasing domestic investor base - are rushing back to Russian securitizations. Liquidity is still a problem. But at Cannes, there was concrete talk of actual public, market-based deals possibly coming within the next couple months, as long as they are relatively short and not too big.
"July could see a few deals come to the public," said Sebastian Walf, vice president in European securitization at Citigroup Global Markets, speaking about the Russian securitization market in general. "It depends on how brave we are."
One deal that generated conference buzz was a term-out of a credit card warehousing facility for Russian Standard Bank, potentially happening within the next few weeks. Sized at a few million, the leads would be facility arrangers ABN Amro and UniCredit. A source close to the deal said Russian credit card deals work well in the current environment because of the significant excess spread due to the "yieldy" assets.
Meanwhile, Deutsche Bank has a mandate to issue a Shariah-compliant, cross-border bond from Russia in a bid to tap the cash-rich Gulf.
These linkups of emerging markets are precisely the kind of transactions that could help the countries further de-couple from the investment vicissitudes in the West, an idea that looks particularly good now as Russia keeps originating at a fast pace but European and U.S. buyers haven't emerged from retrenchment mode.
Warehousing assets has been the name of the game for Russian originators since the crisis gathered steam. With some facilities maturing, the concerns are now centering on exit strategies.
"People will certainly not undertake warehousing unless they know there is an exit strategy at the moment, and not necessarily through the issuance of a securitized bond," said an attendant from a major Western European bank.
In the fall, folks thought the markets would return by 2Q08, and the exit strategy was typically to do a structured deal.
But now, with originators balking at the step-up coupon of rollovers and no real distribution options, alternatives have to be worked into these facilities. "People are willing to entertain a combination of techniques," the banker said.
Also on the minds of Russian players was the recent inclusion of a RUR9.44 billion ($397 million) mortgage bond from the Agency for Housing Mortgage Lending to the Russian Central Bank's Lombard List, broadening the potential pool of investors.
Deals on the list can be used by bank investors for repo operations with the Central Bank. There was debate as to how meaningful it was for other originators with a less-than-sterling rating because the deal, handled by Citigroup and Renaissance Capital, featured a put option in June 2009.
"It does give rise to talk as to whether it's a proper securitization," said Stephen Matthews, a partner at Allen & Overy. Also, binding it so closely to originator risk might be a nice boost for a highly rated, government-linked entity like AHML, but it's not necessarily an advantage for other issuers.
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