Frankfurt am Main, June 23, 2017 -- Moody's Investors Service has assigned definitive rating to Notes issued
by LLC Mortgage Agent TKB-3, Russian RMBS
....RUB 4,095.548 million Residential
Mortgage Backed Fixed Rate Notes due May 2045, Definitive Rating
Assigned Baa3 (sf)
RUB 722.744 million Subordinated Loan was not rated by Moody's.
This transaction will be the third securitisation of mortgages originated
by TRANSKAPITALBANK ("TKB") (B1/NP) and the second securitisation
of TKB's mortgages rated by Moody's. The final portfolio
comprises of RUB 4,609.39 million of the Russian residential
mortgage loans serviced by TKB. DeltaCredit Bank (Ba1/Baa3(cr))
acts as back-up servicer in the transaction. The deal is
static, no substitution of loans will take place during the life
of the deal.
The issuer is incorporated as a mortgage agent (MA) under the law of the
Russian Federation, and has issued one class of RUB-denominated
notes to refinance the purchase of receivables arising from Russian mortgage
loans originated by TKB. A portion of the pool purchase has been
funded by a sub-loan provided by TKB.
RATINGS RATIONALE
The rating takes into account, among other factors: (1) the
performance of the first transaction launched by TKB in 2013, (2)
the credit quality of the underlying mortgage loan pool, from which
Moody's determined the MILAN Credit Enhancement and the portfolio expected
loss, (3) legal considerations and (4) the initial credit enhancement
of 19.6% provided to the notes by the Subordinated Loan
(15.0%) and the reserve fund (4.6%).
--Expected Loss and MILAN CE Analysis
The expected portfolio loss (EL) of 7.5% and the MILAN required
credit enhancement (MILAN CE) of 26% serve as input parameters
for Moody's cash flow model and tranching model, which is based
on a probabilistic lognormal distribution.
The MILAN CE reflects the loss Moody's expects the portfolio to
suffer in the event of a severe recession scenario. The most significant
drivers for the MILAN Credit Enhancement number, which is slightly
higher than the Russian RMBS average of ca. 24.29%,
are (1) the weighted average current loan-to-value (LTV)
of 49.19%, which is in line with the LTV observed
in other comparable Russian RMBS transactions, (2) the limited amount
of historical information available from the originator, (3) low
seasoning of the portfolio (86.2% of the pool are loans
originated during the period 2014-2016), (4) the fact that
for about 74.4% of the borrowers income was verified using
forms provided by the bank rather than official tax forms, as well
as (5) the borrower concentration (the top-20 borrower exposure
is 7.2% of the current pool balance) and geographical concentration
with 63% of the portfolio being concentrated in Moscow and Moscow
region.
The key drivers for the portfolio's expected loss, which is
also slightly higher than the Russian RMBS average of ca. 7.05%
and is based on Moody's assessment of the lifetime loss expectation are:
(1) the limited historical data available on the originator's portfolio,
(2) the fact that the performance of the first securitisation of TKB is
in line with Moody's expectations, (3) benchmarking with comparable
transactions in the Russian RMBS market; and (4) the current economic
conditions in Russia.
--Operational Risk Analysis
TKB serves as the contractual servicer. A back-up servicer
(DeltaCredit Bank) has been appointed at closing. The backup servicer
is required to step in within 12 days and perform the duties of the servicer
if, amongst other things, the servicer is insolvent or defaults
on its obligation under the servicing agreement. Citibank N.A.,
London Branch (A1/A1(cr)) acts as calculation agent.
The collection account is held at TKB. There is a daily sweep of
the funds held in the collection account into the issuer account.
There is no transfer trigger on the collection account based on ratings.
The collection account will be transferred to account opened at another
bank, if the servicer is insolvent or defaults on its obligations.
Moody's has taken into account the commingling risk associated with the
collection account within its cash flow modelling.
The issuer account is held at AO Citibank, which is not rated by
Moody's. The obligations of the issuer account bank are covered
by a guarantee provided by Citibank, N.A. (A1/(P)P-1).
If AO Citibank is for any reason unable to perform its obligations as
issuer account bank, Citibank, N.A. will be
responsible for the performance of these obligations upon its receipt
of request from the Issuer Administrator, TMF RUS Ltd. In
addition, according to the Issuer Administrator Agreement with TMF
RUS Ltd, if the senior unsecured rating of Citibank, N.A.
falls below the level equal to the sovereign rating of Russia reduced
by three notches, then the Issuer (represented by the management
company) will transfer the accounts of the Issuer to another bank,
which senior unsecured rating is not lower than the sovereign rating reduced
by three notches.
--Transaction structure
The notes benefit from credit enhancement of 19.6% provided
by the Subordinated Loan (15.0%) and the amortising reserve
fund (4.6%). The reserve fund has been fully funded
at closing and will start to amortise eight quarters after the deal closing
subject to the reserve fund amortisation criteria and subject to a floor
of 1.14% of the initial pool balance at closing or RUB 57
million.
The transaction has no liquidity facility to cover potential liquidity
shortfalls. However, this is mitigated by: (i) a principal
to pay interest mechanism; and (ii) amortising reserve fund of 4.6%
of the initial pool balance at closing.
-- Parameter Sensitivities
At the time the rating was assigned, the model output indicated
that the Notes would have achieved Baa3 (sf), even if the portfolio
expected loss was increased to 9.38% from 7.5%
and MILAN Credit Enhancement remained unchanged and all other factors
remained the same.
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 September 2016.
Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
The analysis undertaken by Moody's at the initial assignment of
a rating for an RMBS security may focus on aspects that become less relevant
or typically remain unchanged during the surveillance stage. Please
see Moody's Approach to Rating RMBS Using the MILAN Framework for
further information on Moody's analysis at the initial rating assignment
and the on-going surveillance in RMBS.
Other Factors used in this rating are described in "Key Legal and Structural
Rating Issues in Russian Securitisation Transactions", published
in June 2007.
Please note that on 22 March 2017, Moody's released a Request for
Comment, in which it has requested market feedback on potential
revisions to its Approach to Assessing Counterparty Risks in Structured
Finance. If the revised Methodology is implemented as proposed,
the credit rating of Notes issued by Mortgage Agent TKB is not expected
to be affected. Please refer to Moody's Request for Comment,
titled "Moody's Proposes Revisions to Its Approach to Assessing Counterparty
Risks in Structured Finance", for further details regarding the
implications of the proposed Methodology revisions on certain Credit Ratings.
Factors that would lead to an upgrade or downgrade of the rating:
Factors that would lead to an upgrade:
1. A significant improvement in the legal environment and an upgrade
of the Russian Local Currency Ceiling.
Factors that would lead to a downgrade:
1. The ratings downgrade of the Russian Federation;
2. The ratings downgrade of TKB;
3. The growth of the pool delinquencies and loss rates above expectations;
4. Unforeseen regulatory changes.
The definitive rating addresses the expected loss posed to investors by
the legal final maturity of the Notes. In Moody's opinion,
the structure allows for timely payment of interest and ultimate payment
of principal of the notes by the legal final maturity. Other non-credit
risks have not been addressed, but may have a significant effect
on yield to investors.
Moody's will monitor this transaction on an ongoing basis. For
updated monitoring information, please contact monitor.rmbs@moodys.com.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.
The analysis relies on an assessment of collateral characteristics to
determine the collateral loss distribution, that is, the function
that correlates to an assumption about the likelihood of occurrence to
each level of possible losses in the collateral. As a second step,
Moody's evaluates each possible collateral loss scenario using a
model that replicates the relevant structural features to derive payments
and therefore the ultimate potential losses for each rated instrument.
The loss a rated instrument incurs in each collateral loss scenario,
weighted by assumptions about the likelihood of events in that scenario
occurring, results in the expected loss of the rated instrument.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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
Vice President - Senior Analyst
Structured Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Olga Gekht
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
