The credit rating of the senior tranche issued as part of the dynamic transaction has been affirmed at AAA(ru.sf) due to the credit enhancement provided to the senior tranche by the subordinated tranche B, the reserve fund, a high level of excess yield, as well as due to the quality of the collateral portfolio.
RATINGS
The credit rating of bond issue secured by collateralized cash claims has been affirmed at AAA(ru.sf). The maturity date is December 31, 2030. The current issue volume is RUB 7,720 mln.
The junior tranche, which is class B bonds, has not been assigned a credit rating.
TRANSACTION STRUCTURE
The collateralized class A bonds were issued by “SFO Sovcom Secure” LLC (hereinafter, the Issuer) as part of a securitization transaction of a portfolio of consumer loans issued by PJSC Sovcombank (ACRA rating: AА(RU), outlook Stable; hereinafter, Sovcombank, the Bank, or the Originator). The portfolio of consumer loans acts as collateral. The main source of financing for the repayment of 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 collateralized bonds secured by a portfolio of consumer loans issued by Sovcombank to individual borrowers, which has been assigned a credit rating by ACRA. The transaction is dynamic since new loans may be included in the collateral in substitution of those repaid within one year from the bond issue date, also, after the end of the reinvestment period, if there are sufficient funds in the payment waterfall.
The transaction is not a simple, transparent and comparable securitization and does not provide for compensation of losses using the state budget and/or external guarantees of third parties.
ISSUER
The Issuer is a bankruptcy-remote specialized financial company regulated by 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 of Sovcombank, as well as the issue of collateralized bonds.
RATING COMPONENTS
The assigned credit rating reflects ACRA’s opinion regarding the amount of expected losses on the Issuer’s rated bonds before their final 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 of the analysis of the Issuer’s securitized assets included two stages. At the first stage, ACRA, based on vintage tables estimated the expected losses for the consumer loan portfolio with a mathematical expectation (as a result of extrapolation of vintages) of 15.93% and a standard deviation of 4.25%. The Agency notes that statistics on the total portfolio of vintages were used; this type shows a higher default rate compared to vintages in a portfolio formed in accordance with the eligibility criteria. 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 credit quality enhancement mechanisms, projected loss recovery rates, early repayment, reserve fund size, and other factors affecting the distribution of cash flows in the transaction. The estimated expected loss on the Class A bonds over the life of the transaction is 0.01154%.
TRANSACTION STRUCTURE ANALYSIS
The most significant factors that determined the initial structure of the transaction are:
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Level of excess yield due to a difference between the weighted average interest rate on the asset portfolio and the coupon rate on the rated bonds;
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Eligibility criteria for the loan portfolio: the portfolio must not contain collateral for borrowers with a negative credit history and payments overdue for more than 30 days;
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Triggers for the start of accelerated amortization;
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Triggers for replacing the account bank, servicer, and settlement agent;
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Historical data from January 2021 on the debt servicing quality and the recovery rates for the credit product included in the securitized portfolio.
ISSUE STRUCTURE
The rated bonds benefit from subordination, i.e. the priority of payments for the class A bonds is determined by their seniority against the Issuer’s obligations for the class B bonds, which are subordinated to class A bonds. The current total volume of credit enhancement for the rated class A bonds, formed by tranche B, is 23% of the asset portfolio. The bonds benefit from additional credit enhancement in the form of a Special Purpose Reserve Fund (SPRF) amounting to 11% of the tranche A issue volume. The SPRF may be drawn down in proportion to the par value of the rated bonds, subject to the floor amount equal to 1% of the initial issue volume of the bonds and provided that the drawdown criteria listed in the issue documentation are met. During the entire life of the transaction, the SPRF will be one of the main sources of liquidity to offset temporary short-term insufficiencies in interest proceeds available to cover the Issuer’s interest payments for the bonds and to pay for the services rendered by the Issuer’s counterparties. In certain situations, the SPRF may also be a source of credit enhancement for the bonds, i.e. in some scenarios, the SPRF forms part of the collateral available to compensate principal losses. In particular, in case of early repayment of the bonds at the request of bondholders, the SPRF can be used to compensate for insufficient principal proceeds in order to repay the rated bonds.
The structure of the transaction provides for a simple sequential order of distribution of funds. During the reinvestment period, funds credited to the Issuer’s accounts as repayment of the principal on the loans included in the collateral are used to acquire new assets that meet the eligibility criteria. At the end of the reinvestment period, class A bonds are amortized with funds credited to the Issuer's accounts as repayment of the principal on the loans secured by the bonds. The class B bonds will not be repaid until the full repayment of class A bonds. Also, after the end of the reinvestment period, new loans can be purchased if there are sufficient funds in the payment waterfall. In ACRA’s opinion, the structure of this transaction allows for timely coupon payments and principal repayments on the bonds during their entire life before the final maturity date specified in the issue documentation.
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 credit rating has been assigned to the issue (RU000A10AST0) of “SFO Sovcom Secure” LLC based on the following methodologies: the Methodology for Assigning Credit Ratings to Structured Finance Instruments and Obligations under the National Scale for the Russian Federation to determine the credit rating of the bond issue under the national scale of the structured finance sector for the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities to ensure consistent and uniform application of ACRA’s methodologies, rating scales, models, and key rating assumptions.
The credit rating of the issue (RU000A10AST0) assigned under the national scale of the structured finance sector for the Russian Federation was published by ACRA for the first time on February 21, 2025.
The credit rating is expected to be revised within one year.
The credit rating was assigned based on data provided by PJSC Sovcombank and “SFO Sovcom Secure” LLC, information from publicly available sources, and ACRA’s own databases.
The credit rating is solicited and PJSC Sovcombank and “SFO Sovcom Secure” LLC 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 Sovcom Secure” LLC during the year preceding the rating action.
No conflicts of interest were discovered in the course of credit rating assignment.
