Given the months of political upheaval in Ukraine — marked most recently by Russian military intervention in the Crimean peninsula — it might surprise some to learn that a mortgage-backed security from the country is performing well, according to analysts at Moody’s Investors Service.

No that there is much left of the deal, which is originated by Privatbank

Closed seven years ago almost to the day, the $134.1 million A piece of Ukraine Mortgage Loan Finance No. 1 has already fully paid down, according to a Feb. 18 performance overview by Moody’s.

The B piece, which has $11.4 million outstanding from an original $36.9 million, was downgraded to ‘Caa1’ last September. The dismal rating, however, is more a function of the sovereign downgrade than that of collateral performance. Payments over 30-days past due are at a little over 3%. 

“The downgrades are mostly because of the ceiling change at the country level – it’s low probability but high severity risk,” said Christophe de Nouaillat, managing director at the agency.

Moody’s doesn’t rate the C notes, currently at $9 million, the same as when issued.

Back in September, the agency lowered Ukraine’s foreign currency rating to ‘Caa1’ frm ‘B3’ and placed it on review for downgrade over “heightened concerns over [the country’s] external liquidity position [and] increased downside risk related to future negotiations with the IMF.” Since then it has dropped another notch to ‘Caa2.’

Even if performance for the country's only RMBS were to deteriorate significantly, the extant tranches have a sizable cushion protecting them.

“The transaction on its own is doing well, said Lyudmila Udot, assistant vice president at Moody’s. “It has huge credit enhancement.”

Indeed, the B notes enjoy a credit enhancement of 85%, from 9.65% at issuance, while the corresponding figures for the C tranche are 41% from 4.65%.

Interestingly enough, a sharp devaluation of the hryvnia against the dollar doesn’t appear to have hit mortgage payments in the deal, which is denominated in dollars. In the private sector, Ukrainians tend to have their salaries indexed to the greenback.

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