ACRA ASSIGNS AAA(RU) TO THE NOTE ISSUE (RU000A10AFV3) OF LLC “SPC "DOM.RF”

Credit rating rationale. In ACRA’s opinion, the level of risk of the note issue of LLC “SPC “DOM.RF” (previously, LLC “SPC “Infrastructure Notes”; hereinafter, the Issuer) is explained by the presence of irrevocable and unconditional guarantee from JSC “DOM.RF” (AAA(RU), outlook Stable; hereinafter DOM.RF, or the Guarantor) that has, in ACRA’s view, resources that are large enough to cover these obligations. In view of this, the level of risk of the rated note issue corresponds, in the Agency’s opinion, to the level of risk of DOM.RF, i.e. AAA(RU). Therefore, ACRA has assigned this debt instrument a credit rating of AAA(RU).

Key issue properties

Sources: ACRA, issuer’s data

The credit rating is based on financial support to the Issuer from DOM.RF (ААА(RU), outlook Stable), the sole housing development institution. DOM.RF (ААА(RU), outlook Stable) is regulated by Federal Law dated July 13, 2015 No. 225-FZ “On promoting the development and effectiveness of management in the housing sector…”. One of the main goals of DOM.RF (ААА(RU), outlook Stable) is to implement national initiatives that aim to improve housing quality and affordability in Russia. The credit rating has been assigned to the no more than RUB 10 bln² notes only, and it is not ACRA’s assessment of all the issues of the notes program (hereinafter, the Program) intended to implement Decree of the Government of the Russian Federation No. 2459 dated December 31, 2020 “On the approval of the rules for financing projects using the notes of specialized project finance companies and on amending the Regulations on the Governmental Commission for Regional Development in the Russian Federation” (hereinafter, the Rules), as well as Decree of the Government of the Russian Federation dated March 22, 2021 No. 439 “On the approval of the rules for the provision of subsidies from the federal budget to “DOM.RF” Joint-Stock Company in the form of contributions to property that do not increase its authorized capital, in order to reimburse the costs of specialized project financing companies for the payment of interest (coupon) income on notes, the rules for reimbursement of costs of specialized project financing companies for the payment of interest (coupon) income on notes and on amending Decree of the Government of the Russian Federation dated December 30, 2017 No. 1710”. ACRA did not analyze the Issuer’s active part (projects, loans) within the framework of the Rules/Program but took into account relevant restrictions set forth by the Rules.

ACRA notes that the preparation of documentation as part of the Program was carried out with the participation of Linklaters CIS, an independent legal consultant, an international law firm with extensive expertise in project and debt financing transactions.

The notes have a multi-tiered collateral and credit enhancement structure that combines:

• A guarantee of DOM.RF (ААА(RU), outlook Stable) in relation to each separate note issue, which is granted for the par value and coupon payments;

• General collateral in respect to all note issues in the form of pledge of claims under loan agreements and collateral accounts;

• Granting the Issuer a subsidy for making coupon payments on notes equal to the key rate of the Bank of Russia (calculated daily);

• The obligation of DOM.RF (ААА(RU), outlook Stable) to acquire from the Issuer the rights of claim for loans that meet the criteria for defaulted loans;

• Provision to the Issuer of a loan (reserve line) by DOM.RF (ААА(RU), outlook Stable).

ACRA notes that the Program does not include the assignment to the Issuer of the right of claim from any of the original creditors (originators). Consequently, the note issues are not a securitization of credit claims, and the notes are not subject to the rules established by Russian legislation on the assumption of risks by the original creditors on liabilities whose monetary claims constitute collateral.

In ACRA’s opinion, the credit quality of the rated note issues of the Issuer is fully determined by the creditworthiness of the Guarantor, since DOM.RF (ААА(RU), outlook Stable) will provide financial support to the Issuer, and consequently to these issues of notes throughout the entire period of their circulation using the following collateral mechanisms:

• Guarantee for the entire amount of each issue, including the par and coupon payments for the entire outstanding period, according to the terms of which DOM.RF (ААА(RU), outlook Stable) is jointly liable with the Issuer to the noteholders. In addition, each issue provides for a collateral in the form of cash claims, which is expressed through a cross-default clause, which also protects the interests of the noteholders. The trigger for the cross-default for noteholders of any issue is the simultaneous occurrence of the following circumstances: failure to fulfill obligations on the notes of one of the issues, claims of noteholders to the Guarantor regarding one of the issues, as well as the Guarantor’s refusal to fulfill its obligations under the claims for one of the issues within a specified period. The Guarantor undertakes to perform its obligations immediately upon occurrence of event of default, notwithstanding any demands from noteholders.

• In order to minimize the risks of a liquidity gap, a loan agreement is made between the Issuer and DOM.RF (ААА(RU), outlook Stable). A framework agreement serves as the first level of protection of the issues’ credit quality to cover possible cash gaps.

• The Guarantor is obliged to purchase defaulted loans from the Issuer (at a price equal to the amount owed under loan agreements to the Issuer, including the principal and accrued but not paid interest for using the defaulted loan).

• DOM.RF (ААА(RU), outlook Stable) will receive and provide support to the Issuer in the form of a subsidy for the purpose of financial support (reimbursement) of the Issuer’s expenses for the payment of the interest coupon yield on the notes equal to the key rate of the Bank of Russia.

¹ The volume may be increased by no more than 100% at the discretion of the Issuer based on the results of the collection of applications, which will not affect the credit rating of this issue.
² The volume may be increased by no more than 100% at the discretion of the Issuer based on the results of the collection of applications, which will not affect the credit rating of this issue.

Regulatory disclosure

The credit rating has been assigned under the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings to Financial Instruments under the National Scale for the Russian Federation and the Key Concepts Used by Analytical Credit Rating Agency within the Scope of Its Rating Activities.

A credit rating has been assigned to the note issues (RU000A10AFV3) of LLC “SPC “DOM.RF” for the first time. The credit rating is expected to be revised within one year following the publication date of this press release.

The credit rating was assigned based on data provided by JSC “DOM.RF”, LLC “SPC “DOM.RF”, information from publicly available sources, and ACRA’s own databases. The credit rating is solicited and LLC “SPC “DOM.RF” and JSC “DOM.RF” 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 additional services to JSC “DOM.RF”. ACRA provided no additional services to LLC “SPC “DOM.RF”. No conflicts of interest were discovered in the course of credit rating assignment.