This week, onshore American investors will have their first opportunity to get a taste of Russian RMBS. That's when CityMortgage Bank is expected to issue the first 144A-registered transaction from this asset class, according to a source familiar with the transaction. Reg S-registered as well, the deal is also open to Europeans.

Led by Greenwich Financial Services and MNB Capital Markets, a unit of Moscow Narodny Bank, the $73.9 million bond is divvied into a $64.3 million senior tranche, a $6.4 million B class, and a Z piece worth $3.2 million. Moody's Investors Service has rated the senior slice 'Baa2' and the B piece 'B1'. The average life of the senior notes is between three and four years, while the legal final stretches out to 2033.

Closed earlier this month, Russia's debut RMBS, originated by Vneshtorgbank, precluded the participation of onshore U.S. money because the deal was only Reg. S-registered. Investors on both sides of the Atlantic have expressed interest in the CityMortgage deal, according to a source close to the deal. Recent turbulence in emerging markets isn't expected to disrupt the transaction, which will rely more on the strength of the underlying loans and the overall structural resemblance to an auto loan deal for Russia's Bank Soyuz, likewise led by Greenwich and MNB almost exactly a year ago.

Like the Soyuz bond, the CityMortgage deal features a secondary A tranche of negligible size that concentrates all the prepayment risk and is an inverse floater, pricing reverse to Libor. The senior tranche is a standard floater.

While the International Finance Corp. has a relationship with CityMortgage, having provided a warehouse line of credit for mortgage origination, the multilateral didn't provide any kind of guarantee on the RMBS as it did on the Vneshtorg deal. In fact, no outside guarantor helped enhance the CityMortgage transaction. The deal is instead fortified by strong underlying credits, the fact that mortgage certificates back the mortgages, a legal reserve and servicing features, according to a Moody's report.

CityMortgage is the primary servicer, while Zao Raiffeisenbank Austria is the backup servicer. Raffeisenbank parent RZB Group is co-managing the transaction, according to a company website.

Weighing on the deal are the legal uncertainties that typically shadow onshore asset deals in Russia - such as the scarcely tested nature of insolvency procedures; the link to the country's sovereign rating; and the geographic concentration of the collateral in the Moscow region, with about 75%, and St. Petersburg, with 23%. In addition, a number of borrowers earn wages denominated in rubles, giving rise to currency risk given that the loans are in dollars.

The collateral consists of 1,282 loans, with a weighted average size of $56,650. The average LTV is 60.8%.

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

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