ACRA ASSIGNS AN EXPECTED CREDIT RATING TO THE CLASS A1 AND A2 NOTES PLANNED TO BE ISSUED BY LLC “SFO TB-8”

The expected credit rating of the class A1 and A2 note tranches planned for issue under this dynamic transaction has reached eAAA(ru.sf) due to credit enhancement, the special purpose reserve fund (SPRF), the level of excess yield, and the quality of the collateral portfolio.

RATINGS

The eAAA(ru.sf) expected credit rating has been assigned to the planned issue of the class A1 and A2 asset-backed notes, maturity date: [June 6, 2031], volume of the issues: up to RUB [32,000] mln.

The junior tranche, in the form of class B notes, was not assigned an expected credit rating.

TRANSACTION

The class A1 and A2 non-convertible uncertificated interest-bearing asset-backed notes are planned to be issued by LLC “SFO TB-8” (the Issuer) as part of the securitization of a portfolio of credit cards issued by TBank (ACRA rating: AA(RU), outlook Positive; hereinafter, TBank). The collateral is a portfolio of credit cards. The main source of funds for timely payments on the notes are credit card payments received by the Issuer from cardholders.

This transaction is the second issue of notes backed by a portfolio of credit cards issued by TBank to individual borrowers, which has been assigned an expected credit rating by ACRA. The transaction is dynamic: new loans may be included in the collateral in proportion to the repaid principal debt within one year from the note issue date.

The transaction is not subject to STC securitization standards and does not provide for compensation of losses from the state budget and/or external guarantees of third parties.

ISSUER

The Issuer is a special-purpose bankruptcy-remote financial vehicle 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 loan agreements on credit cards issued by TBank and the issuance of asset-backed notes.

TRANSACTION STRUCTURE

The most significant characteristics that determined the structure of the transaction:

• The level of excess yield determined by the difference between the weighted average interest rate on the asset portfolio and the coupon amount on the rated notes;

• Eligibility criteria for the credit card portfolio: absence of borrowers with a negative credit history and a delinquency period of more than five calendar days;

• Transaction triggers: regular and accelerated amortization;

• Historical data since February 2019 regarding the quality of debt servicing and recovery rates for the credit product included in the securitized portfolio.

ISSUE STRUCTURE

The note issue structure uses a subordination mechanism, whereby the priority of fulfillment of obligations under the class A1 notes is determined by their seniority compared to the Issuer's obligations under the B class notes, subordinated to the class A1 and B notes. The total volume of credit enhancement (formed by the class B notes) for the rated class A1 and A2 notes is [20]% of the asset portfolio. Additional credit enhancement for the notes is provided by the SPRF in the amount of [8]% of the issue volume of the class A1 and A2 notes. The SPRF has a hybrid structure: on notes issue date, a basic reserve is formed in the amount of [5]% of the class A1 and A2 notes; in the event of insufficiency of the SPRF, it is replenished to [8]% of the outstanding volume of the class A1 and A2 notes in accordance with a credit facility agreement. The SPRF may be amortized in proportion to the amortization of the notes to a minimum of [1]% of the initial volume of the notes issue, 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 notes, as well as to pay for the services of the Issuer’s counterparties. However, in certain situations, the SPRF funds may also serve as a source of credit enhancement for the notes. The SPRF is included in the collateral for the notes, and in the event of early redemption of the notes at the request of their holders, the SPRF funds can be used to compensate for insufficient proceeds from the principal debt to pay the nominal value of the notes to investors.

The structure of the transaction provides for a simple waterfall of payments. During the reinvestment period, funds received from credit card holders to pay off the principal debt on accounts already included in the pool will be used to purchase subsequent tranches (additional revolving assets) and new credit cards that meet the eligibility criteria. At the end of the reinvestment period, funds received by the Issuer in repayment of the principal debt on the credit cards included in the notes collateral will be used to repay the class A1 notes. After the class A1 notes are redeemed in full, the class A2 notes will be repaid. The class B notes will not be repaid until a full redemption of the class A1 and A2 notes. In ACRA’s opinion, the structure of this transaction allows for timely payment of coupon payments and redemption of the par value of notes throughout their entire life until the onset of the final maturity date legally fixed 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 notes before their legally fixed 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 was carried out in two stages. At the first stage of the analysis of the Issuer’s securitized assets, ACRA, based on historical data, estimated the level of expected losses on the credit card portfolio with a mathematical expectation (as a result of extrapolation) at the level of [22.16]% and a standard deviation of [4.28]%. At the second stage, the results of the analysis were used as one of the input parameters in the GRASP Waterfall Payments (GRASP-WP) model to model the structure of the Issuer’s liabilities, taking into account the influence of credit enhancement mechanisms, projected levels of loss compensation, early repayment, the amount of the SPRF and other factors influencing the distribution of cash flows in the transaction. The potential expected loss on the class A1 / A2 notes over the entire life of the transaction is [0.0001]% / [0.02237]%.

PORTFOLIO CHARACTERISTICS

POTENTIAL RATING CHANGE FACTORS

• Deterioration of macroeconomic conditions that go beyond the stress scenarios used in the rating analysis;

• Growth of overdue debt and increase in the level of losses on the portfolio of lending agreements on credit cards that exceed the parameters used in the rating analysis;

• Amendments to legislation that could have a significant negative impact on the transaction.

REGULATORY DISCLOSURE

The expected credit ratings have been assigned to the note issues of LLC “SFO TB-8” 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 ratings of the note issues under the national scale of the structured finance sector for the Russian Federation; 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 expected credit ratings to the class A1 and A2 notes under the national scale of the structured finance sector for the Russian Federation have been published for the first time.

A next rating action is expected within one year following the publication date of this press release.

The expected credit ratings have been assigned based on data provided by TBank and LLC “SFO TB-8”, information from publicly available sources, and ACRA’s own databases.

The expected credit rating are solicited and TBank and LLC “SFO TB-8” participated the rating process.

In assigning the expected credit ratings, 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 LLC “SFO TB-8” during the year preceding the rating action.

No conflicts of interest were discovered in the course of expected credit rating assignment.