Ahead of other emerging financial markets, Russia has now entered a new era of bank portfolio funding through global CDOs.
UniCredit Aton International has acted as the sole arranger of the first ever Russian securitisation of collateralised debt obligations (Cash Flow CDO).
Reaching a volume of $160 million, “Moscow Region PULSE” sparked off investors’ interest despite challenging market conditions.
“Moscow Region Pulse is a landmark transaction, demonstrating UniCredit Group’s innovative financial technologies allowing clients to efficiently finance their businesses. Synergies of UniCredit Group’s international technologies and its knowledge of the Russian market environment produce tangible advantages to Russian companies as they can attract a wider investor range,” says Sergei Sidorov, head of Capital Markets at UniCredit Aton.
Russia has so far seen three transactions that have brought the local market closer to this stage. However, previous transactions involving synthetic CDOs had achieved transfer of risk but were not designed to deliver financing by means of real sales of bank corporate debt portfolios.
The transaction was based on assets linked to Moscow Region Government utility maintenance programme of Moscow Mortgage Bank (MZB).
“The transaction aimed at reducing costs of the MZB’s borrowings and at the same time at expanding borrowing opportunities for our customers. Our clients’ borrowing needs are huge, so we use this securitisation transaction to reduce funding costs and on the other hand increase funding volumes,” says Kamil Narbekov, chairman of the board, MZB.
“For the first Emerging Markets Cash Flow CDO we have chosen the simplest and most transparent senior/subordinate class structure based on sequential cash flow allocation. We have also reduced the risks to the senior investors beyond the typical CDO/CLO protection levels: the expected term of the senior tranche was intentionally made short – around 6 months – and the subordination ensured protection for the senior investors, not only against asset defaults but against prepayments as well,” adds Dmitry Kozodoy, director, Securitisation Department, UniCredit Aton.
The Originator’s loans had transparent underwriting guidelines combined with standard form loan documentation and the corresponding municipal guarantees. The entire subordinate tranche has been acquired by the portfolio originator, MZB.