With originators from the Commonwealth of Independent States unwilling to accept today's spreads in the primary market, warehousing remains the name of the game. But the word is that certain Western banks, grappling with capitalization issues, have ceased loading assets onto their balance sheets from Russia and its neighbors. This is not so for Unicredit.

The European bank has closed an auto loan facility for Moscow Bank for Reconstruction and Development (MBRD), with initial issuance of notes pulling in nearly RUR1.50 billion ($61 million) for the Russian originator, according to sources close to the deal. The facility can fund the equivalent of another $140 million in notes over the next 12 months, according to MBRD's Web site.

The notes and collateral are denominated in rubles, eliminating exchange rate risk within the structure. Fitch Ratings, the only agency to grade the deal, gave BBB+' to the senior notes. The subordinated notes, rated BBB', equal 2.5% of issuance and 1.9% of the receivables balance.

Obtaining a rating for the facility confers certain Basel II advantages for the warehouse provider, one source said.

While the currency of the collateral and the notes are matched, the interest rates are not. The rate on the 4,419 loans in the pool is fixed, while the notes pay a floating rate linked to Libor. An interest-rated hedge from the arranger reportedly covers that risk.

The underlying collateral totals RUR1.927 billion. Apart from the B notes, a subordinated note facility granted by MBRD provides enhancement amounting to about 26% of the collateral balance.

While MBRD has placed Eurobonds in the market, this deal marks its first securitized structure, according to a source close to the transaction. As pricing expectations between institutional investors and CIS originators have failed to jibe over the past several months, ABS players have put their muscle behind warehouses. "The volume of issuance will - at least for the intermediate term, including 2008 - be primarily dependent on the increasing popularity of warehousing and the timing of refinancing of these warehouses through term securitizations," said Moody's in a recent report on Russia's securitization prospects.

The mortgage market in Russia has been the most compelling securitization niche over the last few years, but auto loans have also made strides. The first public existing asset securitization from Russia was in the auto loan sector, a $49.7 million deal from Bank Soyuz in 2005. Last year, ZAO Raifeissen closed the first auto loan ABS to earn a single-A rating from two agencies. Standard & Poor's and Moody's Investors Service gave the $130 million senior notes A-' and A3' ratings, respectively. Redemption rates in the few outstanding auto loan deals from Russia have been high due to consumer behavior (ASR 2/11/08).

(c) 2008 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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