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Vneshtorgbank makes an important step in developing the Russian mortgage market

 
19 July 2006

Vneshtorgbank has launched the first issue of mortgage-backed Eurobonds in Russia within a project to securitise its mortgage loan portfolio. The issue, totalling USD 88.3 million, was registered at the Irish Stock Exchange. Duration is 29 years. Eurobonds are divided in three tranches in terms of volume, rating and yield. The senior tranche was rated by Moody’s at А1 and by Fitch at BBB+. It is the highest mark for the Russian issuers. At the offering stage, bids were three times as much as the demand. Therefore, securities were distributed at the initial pricing range bottom of LIBOR + 100 – 120 bps. British investors and investment funds and banks from Austria, Portugal, Greece and Germany took most active interest in purchasing Eurobonds.

Barclays Capital и HSBC took part as arrangers of the issue, involving the International Financial Corporation.

According to Andrey Suchkov, Senior Vice President of the Bank, the issue is intended mainly to raise long-term funding in the capital market to offer mortgage loans to households. «Developing the mortgage-backed securities market will allow to make the mortgage mass and affordable, and to reduce loan price for households. Therefore, a successfully implemented project to securitise Vneshtorgbank’s mortgage loan portfolio is an important step in developing the Russian mortgage market.»

The mortgage portfolio sold by Vneshtorgbank has the following features: 90% of mortgage loans assigned to international investors fell on VTB head office in Moscow, while 10%, on its St. Petersburg branch. Average loan volume was over USD 60,000, average interest rate was 11.1 % p.a. In so doing, residential mortgage loans were made for a term from 62 to 302 months. The portfolio comprises loans, which were subject to the public registration of the real estate mortgage held in pledge by Vneshtorgbank and duly covered with major Russian insurance companies. No overdue payments for over 30 days suggest a high quality portfolio and its good service.


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