The expected credit rating of the senior tranche planned for issuance under this dynamic transaction has reached eAAA(ru.sf) due to the credit enhancement provided to the senior tranche by the subordinated tranche (junior loan), the reserve fund, a high level of excess yield, as well as due to the quality of the collateral portfolio.
RATINGS
An expected credit rating of eAAA(ru.sf) has been assigned to the planned issue of bonds secured by collateralized cash claims, the maturity date is [December 27, 2028], the issue volume is no more than RUB [7,700] mln.
An expected credit rating has not been assigned to the junior tranche, which is represented by a subordinated loan in relation to the senior tranche.
TRANSACTION STRUCTURE
Class A bonds with collateral are planned to be issued by “SFO Split Finance 1” LLC (hereinafter, the Issuer) as part of a securitization transaction of a portfolio of consumer loans issued by JSC “Yandex Bank” (ACRA rating A(RU), outlook Stable; hereinafter, Yandex Bank, the Bank, or the Originator). The portfolio of consumer loans acts as collateral. The main source of financing for the fulfillment of obligations for the bonds is the funds received by the Issuer from borrowers to pay off obligations for the loans.
This transaction is the first issue of bonds with collateral secured by a portfolio of consumer loans issued by Yandex Bank to individual borrowers, which has been assigned an expected credit rating by ACRA. “Yandex Pay” LLC or “Financial and Payment Technologies” LLC act as the backup servicing agent, ready to assume all functions for supporting the portfolio in the event of replacement of the servicing agent. The transaction is dynamic: the structure of the transaction provides for the inclusion of new loans in the collateral in exchange for those repaid within one year from the date of the bond issue.
The transaction has not been organized within the framework of Simple, Transparent and Comparable Securitization Standards and does not provide for compensation of losses using the state budget and/or external guarantees of third parties.
ISSUER
The Issuer is a specialized financial company with limited bankruptcy risk, operating in accordance with Federal Law No. 39-FZ “On the Securities Market” dated April 22, 1996. The exclusive subject of the Issuer’s activities is the acquisition of rights of claim under consumer loan agreements — Yandex Split (super Split) — as well as the issue of bonds with collateral.
TRANSACTION STRUCTURE analysis
The most significant factors that determined the structure of the transaction are:
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A high level of excess yield due to a significant difference between the weighted average interest rate on the asset portfolio and the coupon amount on the rated bonds;
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Eligibility requirements for the loan portfolio: the portfolio must not contain collateral for borrowers with a negative credit history and overdue payments of more than 30 days;
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Transaction triggers: accelerated and parallel depreciation;
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The hybrid nature of the assets in the collateral portfolio, combining elements of an installment plan and a credit card; the borrower knows the total amount of overpayment in advance when choosing an installment plan term;
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To confirm income, the client provides Yandex Bank with access to the Credit History Bureau, where his/her identity and other necessary information are also confirmed;
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Limited historical data on the quality of debt servicing and on the levels of reimbursement for the credit product included in the securitized portfolio due to the launch of lending in 2023.
ISSUE STRUCTURE
The bond issue structure uses a subordination mechanism, whereby the priority of fulfillment of obligations under the class A bonds is determined by their seniority compared to the Issuer's obligations under the junior tranche subordinated to class A bonds. The total volume of credit enhancement for the rated class A bonds, formed through the junior loan, amounts to [23]% of the asset portfolio. Additional credit enhancement for the bonds is provided by a special-purpose reserve fund (SPRF), formed on the issue date in the amount of [7]% of the issue volume of the class A bonds. The SPRF may be amortized in proportion to the amortization of the bonds after the end of the revolving period to a minimum limit equal to [1]% of the initial issue volume of class A bonds, subject to the conditions specified in the issue documentation. During the life of the transaction, the SPRF is one of the main sources of liquidity to compensate for short-term insufficiency of interest income to make payments on the bonds, as well as to pay for the services of the Issuer’s counterparties. However, in certain situations, the reserve fund may also serve as a source of credit support for bonds. The reserve fund is included in the collateral for the bonds, and in the event of early redemption of the bonds at the request of their owners, the reserve fund may be used to compensate for the insufficiency of the principal proceeds to fully pay the nominal value of the bonds to investors.
The structure of the transaction provides for a simple sequential order of distribution of funds. During the reinvestment period, funds received in the Issuer’s accounts as payment of obligations to repay the principal amount of debt on loans included in the bond security are used to acquire new assets that meet the qualification requirements. At the end of the reinvestment period, these funds are used for parallel amortization of class A bonds and the junior tranche, subject to compliance with transaction triggers. In ACRA’s opinion, the structure of this transaction allows for timely payment of coupon payments and repayment of the nominal value of the bonds throughout their entire life until the onset of the final maturity date legally set by the issue documentation.
RATING COMPONENTS
The assigned expected credit rating reflects ACRA’s opinion regarding the amount of expected losses on the Issuer’s rated bonds before their legally established maturity date. As per the Methodology for Assigning Credit Ratings to Structured Finance Instruments and Obligations under the National Scale for the Russian Federation, ACRA’s analysis includes two stages. At the first stage of the analysis of the Issuer’s securitized assets, ACRA, based on vintage tables, estimated the level of expected losses for the consumer loan portfolio with a mathematical expectation (as a result of extrapolation of vintages) at the level of [23.88]% and a standard deviation of [5.12]%. At the same time, the Agency notes that, due to the shallow depth of historical data, statistics on general portfolio vintages with a higher level of defaults were used. An analysis of vintage tables for the consumer loan portfolio that secures the rated bonds and was selected according to the qualification requirements shows expected losses with a mathematical expectation (as a result of extrapolation) of [7.05]% and a standard deviation of [2.25]%. At the second stage, the results of the vintage analysis were used as one of the input parameters in the GRASP Payment Waterfall (GRASP-WP) model to model the structure of the Issuer’s liabilities, taking into account the influence of credit quality enhancement mechanisms, projected levels of loss compensation, early repayment reserve fund size, and other factors affecting the distribution of cash flows in the transaction.
Yandex Bank provided historical data on the quality of loan servicing in the bank portfolio for the product super Split (previously named Improved Split) for 6, 12, and 24 months in the format of vintage tables for the period from 2023 to 2024.
The analyzed portfolio has the following distribution by product: super Split 24 — 55%, super Split 12 — 17%, super Split 6 — 28%.
POTENTIAL RATING CHANGE FACTORS
Events that may lead to a negative rating action include the following:
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Deterioration of macroeconomic conditions that go beyond the stress scenarios employed in the rating analysis;
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Growth of overdue debt and losses on the loan portfolio that exceed the parameters employed in the rating analysis;
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Amendments to legislation that could have a significant negative impact on the transaction.
REGULATORY DISCLOSURE
The expected credit rating has been assigned under the national scale of the structured finance sector for the Russian Federation based on the Methodology for Assigning Credit Ratings to Structured Finance Instruments and Obligations under the National Scale for the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.
An expected credit rating has been assigned to the class A cash-secured bonds planned to be issued by “SFO Split Finance 1” LLC for the first time. ACRA expects to assign a definitive credit rating within one year from the date of publication of this press release.
The expected credit rating was assigned based on data provided by JSC “Yandex Bank”, information from publicly available sources, and ACRA’s own databases. The expected credit rating is solicited and JSC “Yandex Bank” participated in its assignment.
In assigning the credit rating, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided no additional services to “SFO Split Finance 1” LLC and JSC “Yandex Bank”. No conflicts of interest were discovered in the course of the expected credit rating assignment.
