MIAMI - Russia's push into the world of existing asset securitization isn't even two years old, and there is already talk of potential bottlenecks on the demand side if the breakneck pace of growth holds firm. These remarks were made at last week's Information Management Network Spring ABS 2007 conference.
There were about $1.5 billion of deals last year. That is projected to swell to between $3 billion and $4 billion for this year, which could double yet again in 2008. "It's not an easy proposition to place this kind of volume into [the ratings] bracket," of triple-B and single-A, said Michael Strange, director of financial institution securitization at Barclays Capital. One solution, he mentioned, would be monoline participation.
Finding investors locally is another one, but participants said that they wouldn't be able to absorb the magnitude of volumes being churned out. And, for ruble-denominated transactions, they've become cozy with higher returns. "At the moment, securitization is not a preferred instrument in Russia because of the low yield," said Simon Vine, managing director at Alfa Bank.
However, he added that ruble-denominated loans are growing particularly fast, especially in the consumer sector and outside Moscow and St. Petersburg. Cross-border deals that collateralize these loans would either be in dollars and carry a swap, or be in rubles and end up with investors willing to take on ruble risk or to hedge it themselves. The swap market is still relatively undeveloped, while the ruble forward market is more developed, Vine said.
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