The expected credit rating of the asset-backed securities of LLC “GPB Aerofinance” (hereinafter, the Issuer) has reached the maximum eAAA(ru.sf) due to the unconditional and irrevocable guarantee of refinancing provided by Schweizerische Exportrisikoversicherung (hereinafter, SERV; credit rating under the international scale — AAA, outlook Stable).
Ratings
The expected credit rating of eАAA(ru.sf) has been assigned to the certified non-convertible collateralized coupon notes (ISIN RU000A0JXM22) with an annual fixed interest rate of 9.67%. Legal final maturity of the notes: March 15, 2030; issuance volume: RUB 9.095 bln. As of the rating assignment date (October 29, 2019), the outstanding principal of the notes was RUB 8.526 bln.
As of the rating assignment date, the transaction structure prevented the issuance from achieving the maximum definitive rating of AAA(ru.sf) due to the absence of a backup account bank capable of replacing the main account bank — Bank GPB (JSC) (hereinafter, Gazprombank; ACRA rating — AA(RU), outlook Positive) in the event of default of Gazprombank.
To achieve the maximum definitive credit rating, the Arranger represented by Gazprombank will supplement the transaction with a backup account bank that holds an ACRA rating of at least AA-(RU), and a trigger to replace the main account bank if its rating is downgraded to A+(RU). As of the expected rating assignment date, it was assumed that JSC “ALFA-BANK” (hereinafter, Alfa-Bank; ACRA rating — AA(RU), outlook Stable) will assume the obligations of the backup account bank. The expected credit rating has been assigned on the condition that a backup account bank is added to the transaction structure.
ACRA received a request to assign a rating to the notes after they were issued. In its analysis, ACRA took into account the degree of amortization of the loans and the note repayment schedule over the course of the 30 months that have passed since the date of their issuance to the expected rating assignment date (October 29, 2019).
The transaction is structured as a loan repack that does not use a tranching mechanism. The absence of any subordination mechanism in the transaction means that the rating of the Issuer’s liabilities depends entirely on the positive or negative dynamics of the credit quality (ratings) of the key elements of the transaction.
Transaction structure
The notes were issued on March 27, 2017 as part of a transaction to securitize cash flows under the loan agreement provided to Gazprombank (Switzerland) Ltd. (hereinafter, GPB (Switzerland), the Borrower) in order to refinance a loan granted by GPB (Switzerland) in favor of LLC “GPB Aeroleasing”. These funds were provided to finance a project to supply 62 double-decker passenger wagons manufactured by Swiss company Stadler Bussnang to LLC “Aeroexpress” in order to develop the railroad link between Moscow and the airports of the Moscow Aviation Hub.
The pledged collateral portfolio and source of financing for the obligations under the notes consist of receivables on the loan agreement concluded by the Issuer and GPB (Switzerland), and receivables on the collateral account of the Issuer held at Gazprombank.
The obligations of GPB (Switzerland) under the loan agreement are guaranteed by the unconditional and irrevocable refinancing guarantee provided by SERV.
The transaction is static: no new assets may be added to the Issuer’s collateral portfolio until the notes’ maturity.
The transaction is not based on the principles of self-certification or minimization of independent analysis in the STC securitization framework, and it does not provide for any state budget support.
Issuer
The Issuer is “GPB Aerofinance”, which was founded as per the Civil Code of the Russian Federation, Federal Law No. 14-FZ “On Limited Liability Companies” (with amendments and addenda) dd. February 8, 1998, and the decision of the general meeting of the company’s founders.
The Issuer is not a bankruptcy-remote special purpose vehicle.
At the time of assigning the expected rating, ACRA received a memorandum from the law firm Yegorov Puginsky Afanasyev & Partners regarding the possibility of Gazprombank’s lenders recovering money from the bank account opened by the representative of bondholders in the central depository should Gazprombank fail to fulfill its obligations creditors, including in the event that any procedure is launched against it in a bankruptcy case under Federal Law No. 127-FZ “On Insolvency (Bankruptcy)” dd. October 26, 2002.
According to the memorandum, there are no legal institutions that would allow the Issuer (a subsidiary) to be held liable for the debts of Gazprombank, which wholly owns LLC “GPB Aerofinance”.
Rating components
The expected credit rating reflects ACRA’s opinion on the expected losses posed to investors by the notes’ legal final maturity in accordance with the Methodology for Assigning Credit Ratings to Structured Finance Instruments and Obligations on the National Scale for the Russian Federation and the Methodology for Mapping Credit Ratings Assigned on ACRA’s International Scale to Credit Ratings Assigned on ACRA’s National Scale for the Russian Federation.
Portfolio
Expected contents of the collateral:
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The receivables to the Borrower under its RUB 9.095 bln loan agreement with the Issuer. As of the rating assignment date, the outstanding principal was RUB 8.526 bln.
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Funds held on the Issuer’s collateral account at Gazprombank.
SERV guarantees to cover the obligations under the loan agreement in full, including 100% of the outstanding principal, accrued interest, fines, and penalties.
The refinancing guarantee stipulates that if the Borrower fails to fulfil its payment obligations, including timely payment of interest and repayment of the principal, the Issuer shall send a claim to SERV and simultaneously resolve to carry out early full redemption of the notes 14 days after the failure to fulfil the aforementioned obligations. Under the refinancing guarantee agreement, SERV shall transfer the monetary receivables in full in a single payment.
Credit quality of SERV
SERV operates under the control of the Swiss government and the Swiss State Secretariat for Economic Affairs (SECO). The core activity of SERV is insuring exports of consumer goods and means of production, foreign construction and engineering works, and other types of services for both small and medium-sized enterprises and major corporations.
ACRA has assigned SERV the highest possible credit rating under the international scale — AAA. An AAA rating under the international scale is equal to an AAA(RU) rating on the national scale as per the Methodology for Mapping Credit Ratings Assigned on ACRA’s International Scale to Credit Ratings Assigned on ACRA’s National Scale for the Russian Federation.
Issue
The issue structure does not employ a subordination mechanism where the priority of note payments is determined by their seniority compared to the Issuer’s other obligations.
The structure of payments of collateral allows for timely payment of coupon payments and redemption of the nominal value of notes throughout their life until the legal final maturity of the transaction. Under payment schedule, payments on the loan are made two days before the corresponding payments on the Issuer’s notes.
Under the note redemption schedule, which replicates the loan repayment schedule, payments are made twice a year. On the first three dates only interest is paid. Then, from the 4th until the 26th payment date, interest and 1/48 of the principal are paid. On the last note redemption date (March 15, 2030), the remaining part of the principal is paid. This is equal to half plus one 1/48 of the initial nominal of the notes and the remaining interest payments.
Regulatory disclosure
The expected credit rating has been assigned on the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings to Structured Finance Instruments and Obligations on the National Scale for the Russian Federation, Methodology for Mapping Credit Ratings Assigned on ACRA’s International Scale to Credit Ratings Assigned on ACRA’s National Scale for the Russian Federation, and the Key Concepts Used by Analytical Credit Rating Agency within the Scope of Its Rating Activities.
The expected credit rating has been assigned to the asset-backed notes of LLC “GPB Aerofinance” for the first time. ACRA expects to assign the definitive credit rating within 180 days following the publication date of this press release.
The expected credit rating has been assigned based on the data provided by Bank GPB (JSC), information from publicly available sources, as well as ACRA’s own databases. The expected credit rating is solicited, and Bank GPB (JSC) participated in the rating process.
No material discrepancies between the provided information and the data officially disclosed by Bank GPB (JSC) in its financial statements have been discovered.
ACRA provided additional services to Bank GPB (JSC). ACRA provided no additional services to LLC “GPB Aerofinance”. No conflicts of interest were identified in the course of the credit rating process.
