July 21, 2006, Moscow, Russia –
IFC provided two types of credit enhancement to support Russia’s first
securitization of residential mortgage loans, which was successfully completed
today by Vneshtorgbank, Russia’s second largest bank. Placed by
co-lead managers Barclays Capital and HSBC, the transaction involved the
cross-border sale of U.S. dollar-denominated fixed rate residential mortgage
loans to a Luxembourg-based SPV that funded its purchase through the issuance
of three classes of notes.
IFC provided credit enhancement to the senior Class A note holders through
its purchase of the subordinated Class B notes and through its provision
of a guarantee of an offshore liquidity facility (GOLF). The GOLF
facility insures that liquidity will be available to cover 18 months of
interest (on the Class A and B notes) and SPV expenses in the event the
Russian government imposed currency transfer and/or convertibility restrictions.
IFC’s GOLF credit enhancement allowed the senior Class A securities to
receive a credit rating (A1/BBB+ from Moody’s/Fitch) one notch higher
than that of Vneshtorgbank and the agencies’ respective country ceiling.
As the first mortgage-backed securitization from the Russian Federation,
the transaction will offer a potentially useful guide for other originators
of mortgage assets in Russia and, in addition, provide additional impetus
to improve the legal framework for domestic asset-backed securitizations
Andrey Suchkov, Senior Vice President at VTB said: "The main purpose
of issuing mortgage backed securities is to raise long term financing from
the capital markets for providing mortgages to Russian consumers. Development
of the market for mortgage backed securities will make mortgages more accessible
and affordable to Russian home-buyers. Therefore a successful mortgage
securitization of Vneshtorgbank's mortgage pool is an important step in
the direction of further development of the Russian housing market".
Edward Nassim, IFC’s regional vice president for Africa, Europe and the
Middle East, said, “Housing finance is the core element of IFC's financial
markets strategy in Central and Eastern Europe, especially in Russia, where
housing is one of the national priorities. Therefore, we are very
pleased to support this first Russian mortgage backed securities issue
as an important step in development of the secondary mortgage market in
Jyrki Koskelo, IFC’s director of Global Financial Markets Department added,
“Russian housing finance market is still in a nascent stage with mortgage
debt outstanding representing less than 1 percent of GDP. Therefore,
there is a significant need for development of a viable and market-based
funding mechanism by Russian mortgage originators to support the further
growth of housing finance and facilitate improvement of living standards.
The first successful placement of residential mortgage backed securities
by a Russian bank is expected to have a high development impact and will
benefit Russian home-buyers by improving access to housing finance.”
The International Finance Corporation is the private sector arm of
the World Bank Group and is headquartered in Washington, D.C. IFC
coordinates its activities with the other institutions of the World Bank
Group but is legally and financially independent. Its 178 member
countries provide its share capital and collectively determine its policies.
The mission of IFC is to promote sustainable private sector investment
in developing and transition countries, helping to reduce poverty and improve
people’s lives. IFC finances private sector investments in the developing
world, mobilizes capital in the international financial markets, helps
clients improve social and environmental sustainability, and provides technical
assistance and advice to governments and businesses. From its founding
in 1956 through FY05, IFC has committed more than $49 billion of its own
funds and arranged $24 billion in syndications for 3,319 companies in 140
developing countries. For more information, visit www.ifc.org.
IFC manages environmental and social risks associated with the projects
it finances through standards that its clients companies are required to
apply. In collaboration with client companies, IFC looks at business opportunities
arising from the protection of the environment and from social development.
IFC also explores and develops new financial products that create new business
opportunities linked with the environment and social development.
IFC in Russia
Russia became a member and a shareholder
of IFC in 1993. Since then IFC has invested $2.9 billion in the country,
including $527 million in syndicated loans, in over 110 projects across
a variety of sectors. In FY05 (July 2004–June 2005) IFC’s investments
reached $832 million. IFC’s investment portfolio in Russia currently stands
at $1.8 billion, making it the largest country exposure for IFC globally.
IFC has invested in key sectors including banking, leasing, housing finance,
infrastructure, mining, agribusiness, pulp and paper, construction materials,
oil and gas, telecommunications, information technologies, retail, and
health care. For more information, visit www.ifc.org/europe.