Approximately RUB [4,940.00] million of Debt Securities Rated
Frankfurt am Main, April 26, 2013 -- Moody's Investors Service has assigned provisional long-term credit
ratings to Notes to be issued by Closed Joint Stock Company "Mortgage
Agent KHMB-1":
RUB [4,940.00] million Class A Residential Mortgage
Backed Fixed Rate Notes due 2045, Provisional Rating Assigned (P)Baa3
(sf)
RUB [1,560.00] million Class B Notes were not rated
by Moody's.
This transaction is the first securitisation of mortgages originated by
JSC Bank of Khanty-Mansiysk (Ba3). The portfolio consists
of the Russian residential mortgage loans serviced by Bank of Khanty-Mansiysk.
DeltaCredit Bank (Baa3/P-3) will be acting as back-up servicer
in the transaction.
RATINGS RATIONALE
The rating takes into account the credit quality of the underlying mortgage
loan pool, from which Moody's determined the MILAN Credit Enhancement
and the portfolio Expected Loss, as well as the transaction structure
and legal considerations. The expected portfolio loss of 8.5%
and the MILAN required credit enhancement of 27% serve as input
parameters for Moody's cash flow model and tranching model, which
is based on a probabilistic lognormal distribution as described in the
report "The Lognormal Method Applied to ABS Analysis", published
in July 2000.
The most significant driver for the MILAN Credit Enhancement number,
which is slightly higher than other MILAN CE numbers in the Russian RMBS
transactions, was the limited amount of historical information available
from the originator and the fact that for about 66.8% of
the borrowers income was verified using forms provided by the bank rather
than official tax forms. The main driver for the expected loss,
which is also slightly higher with expected losses assumed for other Russian
RMBS transactions, was the limited historical data available on
the originator's portfolio, as the historical vintage data covers
only the period from January 2011 to October 2012. The weighted
average current loan-to-value (LTV) of 54.5%
is in line with the LTV observed in other Russian RMBS transactions.
Another significant driver for rating was the fact that about 47.8%
of the loans in the pool are not backed by a mortgage certificate.
Although assignment of mortgage rights not evidenced by a mortgage certificate
is not prohibited by Russian law, there are additional set-off
risks that may arise e.g. from fees and insurance premiums
paid by the borrowers, which could be claimed back and offset against
monthly payments under the mortgage loan. Moody's took this
set-off risk into account when modelling the cash-flows
for this transaction.
The transaction benefits from an amortising reserve fund initially sized
at 2.0% of the notes at closing and building up to 4.15%
of the initial notes balance using the excess spread. The reserve
fund is replenished before the interest payment on the unrated Class B
notes. Subject to conditions such as no draw on the reserve fund,
no unpaid principal deficiency, and no servicer default, the
reserve fund may amortise at 4.15% of the outstanding notes
down to a floor of 0.85% of initial note balance.
The reserve fund amortisation will start on the eighths payment date.
The provisional ratings address the expected loss posed to investors by
the legal final maturity of the notes. Moody's issues provisional
ratings in advance of the final sale of securities, but these ratings
represent only Moody's preliminary credit opinions. Upon a conclusive
review of the transaction and associated documentation, Moody's
will endeavour to assign definitive ratings to the notes. A definitive
rating may differ from a provisional rating. Other non-credit
risks have not been addressed, but may have a significant effect
on yield to investors.
The V Score for this transaction is High, which is in line with
the score assigned for the Russian RMBS sector. The High V-Score
reflects uncertainty associated with legal and regulatory environment
in the sector, limited experience of the originator in the securitisation
market, and limited performance data available for the book of the
originator. V-Scores are a relative assessment of the quality
of available credit information and of the degree of dependence on various
assumptions used in determining the rating. High variability in
key assumptions could expose a rating to more likelihood of rating changes.
The V-Score has been assigned accordingly to the report "V-Scores
and Parameter Sensitivities in the Major EMEA RMBS Sectors" published
in April 2009.
Moody's Parameter Sensitivities: Even if the portfolio expected
loss was increased from 8.5% to 14.9% and
MILAN Credit Enhancement was increased from 27% to 43.2%,
the model output indicates that the Class A notes would have achieved
Baa3.
Moody's Parameter Sensitivities provide a quantitative/model-indicated
calculation of the number of rating notches that a Moody's structured
finance security may vary if certain input parameters used in the initial
rating process differed. The analysis assumes that the deal has
not aged and is not intended to measure how the rating of the security
might migrate over time, but rather how the initial rating of the
security might have differed if key rating input parameters were varied.
Parameter Sensitivities for the typical EMEA RMBS transaction are calculated
by stressing key variable inputs in Moody's primary rating model.
The principal methodology used in this rating was Moody's Approach to
Rating RMBS using the MILAN Framework published in March 2013.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
Other Factors used in this rating are described in Key Legal and Structural
Rating Issues in Russian Securitisation Transactions published in June
2007.
In rating this transaction, Moody's used a cash flow model to model
the cash flows and determine the loss for each tranche. The cash
flow model evaluates all default scenarios that are then weighted considering
the probabilities of the lognormal distribution assumed for the portfolio
default rate. In each default scenario, the corresponding
loss for each class of notes is calculated given the incoming cash flows
from the assets and the outgoing payments to third parties and noteholders.
Therefore, the expected loss or EL for each tranche is the sum product
of (i) the probability of occurrence of each default scenario; and
(ii) the loss derived from the cash flow model in each default scenario
for each tranche.
As such, Moody's analysis encompasses the assessment of stressed
scenarios.
Moody's also considered scenarios where the Mortgage Agent has defaulted
as a result of non-payment of senior fees or interest on the notes,
asset-liability mismatch, or insufficient mortgage coverage.
In this case, Moody's assumed that the liquidation of assets occurred
and the notes were repaid according to the post-enforcement waterfall
using the proceeds of the asset liquidation assuming a recovery rate of
50%. Moody's is currently investigating whether changes
to the MBS Law, which came into effect on January 1, 2013,
would eliminate or significantly reduce the risk of liquidation of the
Mortgage Agent to the extent that this modelling would no longer be necessary.
If that is the case, the ratings of the notes of this transaction
may be positively affected.
REGULATORY DISCLOSURES
Moody's did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments in this transaction.
Further information on the representations and warranties and enforcement
mechanisms available to investors are available on http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF327119.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Stanislav Nastassine
Asst Vice President - Analyst
Structured Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Michelangelo Margaria
VP - Senior Credit Officer/Manager
Structured Finance Group
Telephone:+39-02-9148-1100
Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns provisional ratings to notes to be issued by Closed Joint Stock Company "Mortgage Agent KHMB-1", Russian RMBS
