Russian Standard Bank (RSB) will soon hit the market with a 250 million ($313 million) transaction backed by auto loans, in a deal that the originator hopes will further diversify its funding base, thanks in part to slightly higher ratings than its last existing asset deal and to the growing familiarity with the bank among structured finance investors. HVB and JPMorgan are the leads.
"We are looking to enlarge our investor base and hope to reach a different tier of investor, as we have achieved higher ratings for the class A and B notes," said Levan Zolotarev, senior vice president of Russian Standard Bank.
The recently launched auto loan transaction, Russian Car Loans No. 1, is sliced up into an A tranche totaling 133.8 million, a B piece for 35 million, a C tranche for 51.3 million and a subordinated loan sized at 30 million. Moody's Investors Service and Standard & Poor's rated the A, B and C pieces Baa1'/'A-', Baa1/'BBB' and Ba2'/BB', respectively. The subordinated tranche is unrated. The A, B, and C slices have a three-year weighted average life and an 11-year final maturity.
RSB's last existing asset transaction - a 300 million, six-year final deal backed by consumer loans - featured an A piece rated Baa2'/'BBB' and a B tranche at BB'/'Ba2', respectively.
The leads took the auto loan transaction on roadshow last week. Exclusively Reg-S registered, the deal is being peddled in Paris, Lisbon, London, Vienna, and other leading European cities.
The underlying pool consists of 59,840 loans with an average LTV of 73.15%. Some 92% of the cars bought with the collateralized loans are new. The assets are dispersed geographically, with 18.26% coming from Moscow, 18.03% from the southwest Siberian metropolis of Novosibirsk, and 13.42% from the Eurasian border city of Ekaterinburg.
With Russia still a newcomer to the securitization playing field, legal uncertainty invariably dogs the enforcement of existing asset transactions. While structural buttresses in Russian Car Loans No. 1 are in place to meet potential challenges to such legal features as the true sale of assets, the deal doesn't quite lie in the comfort zone of analogous deals in Western Europe, according to Moody's. "Several key legal concepts...are not clearly defined and their application may be open to challenge," the agency said in a report. "This results in a higher level of residual legal uncertainty than what we typically see in other EMEA ABS deals and this has been taken into account in our analysis."
The collateral is the revolving kind, with the average yield currently at 13.5%. While this rate could come down in the event that lower-yielding assets are dropped into the pool, the subordinated loan protects the structure from excess spread shrinking below 3% for the preceding three months, according to S&P.
The assets are in rubles, a mismatch with the bond that generates currency risk. A balance guaranteed swap wards off the threat of oscillating currency and interest rates. Also in the works for RSB is a first time credit card deal via joint leads HVB and ABN Amro. That deal is due out in January or February, according to a market source.
Robust energy-led growth in the Russian economy has given consumers more purchasing power, feeding into RSB's loan book. The bank's assets ballooned to RUR151.0 billion ($5.6 billion) at the end of the first half of the year from RUR112.7 billion at the end of 2005.
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