Longing is an emotion romanticized in the renowned works of Russian literature, but not by time-pressured players of high finance stalking Moscow for deals.

So chances are few of them will miss pining for a market-based Russian RMBS when it comes alive as soon as April, the month Vneshtorgbank is slated to issue a deal for between $100 million and $200 million, according to a source familiar with the transaction. The arrangers are reportedly HSBC and Barclays Capital, according to sources. Officials at the banks couldn't confirm the talk as of press time.

The buzz is that the deal will have a senior tranche of between $80 million and $85 million, a legal final of 25 years and an average life of five years. Preliminary undisclosed ratings are BBB' from Fitch Ratings and A1' from Moody's Investors Service, suggesting that the transaction will likely bear a ratings split that spans a few notches. The collateral consists of dollar-denominated loans to upper-middle class homeowners in Russia. The portfolio is understood to have a fresh seasoning, a weakness that the arrangers will have to appropriately address in order to quell investor concerns about performance history, a market source said.

Other concerns that invariably dog any deals with Russian local assets are legal in nature.

"What Russian judge is going to kick a Russian from his home because a mortgage held by an SPV defaulted?" asked one banker, a question that others will no doubt parrot during the deal's road show.

Offshore location

The SPV will be located offshore, according to the source familiar with the deal. Despite the lingering apprehensions about the legal underpinning of Russia's existing-asset deals, observers have noted that the true sale in an auto loan securitization for Bank Soyuz completed last year could provide a sound template for an RMBS. There is no word yet on how close the Vneshtorgbank deal will hew to its existing asset predecessor.

Vneshtorgbank has made trips to the cross-border capital market before, having issued $2.65 billion eurobonds with maturities from 2008 to 2035. The arrangers might not be starting out with an entirely blank slate when marketing the RMBS to investors.

Fitch and Moody's rate the bank's long-term foreign currency BBB' and Baa2,' respectively. Vneshtorgbank is the second largest bank owned by the Russian government, with assets that have ballooned threefold in the past three years, according to a report by Fitch. The agency said the bank aims to become a midsize European bank, boosting the chance of acquisitions.

Elsewhere in Russia, players expect more auto loan deals as well as transactions backed by loans to small and medium enterprises. The latter could back a deal as large as $300 million to $400 million. An MBS is also a possibility from Delta-Credit.

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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