ACRA ASSIGNS AN EXPECTED CREDIT RATING TO THE SENIOR TRANCHE OF MORTGAGE-BACKED SECURITIES TO BE ISSUED BY LLC “MA TB-7”

The expected credit rating of the senior tranche to be issued in this static MBS transaction is eAAA(ru.sf) due to the credit enhancement provided to the senior tranche by the subordinated (junior) tranches of notes, excess spread, reserve fund, as well as the satisfactory credit quality of the securitized portfolio.

ratings

The expected eААА(ru.sf) credit rating has been assigned to the planned issue of mortgage-backed residential fixed-rate notes. The final maturity of the notes is [August 26, 2043], and the issue volume is no more than RUB [10] bln.

The junior tranche, which is B class notes, has not been assigned an expected credit rating.

Transaction structure

The class A exchange-traded mortgage-backed notes are planned to be issued by LLC “MA TB-7” (hereinafter, the Issuer) as part of the securitization of the portfolio of mortgage loans issued by TBank (ACRA rating: AA(RU), outlook Stable) (hereinafter, TBank or the Bank).

The Issuer plans to issue ruble-denominated fixed-rate notes. The Issuer will use the proceeds from the issuance to purchase a portfolio of mortgage loans originated by TBank. The receivables on the mortgage loans acquired by the Issuer will be included in the mortgage collateral of the notes. The main source of payments on the rated notes stems from repayments from the underlying mortgage loans.

This transaction is the fourth issue of classic MBS backed by a portfolio of mortgage loans issued by TBank, which is assigned an expected credit rating. The securitized portfolio consists of Russian residential mortgage loans serviced by the Bank. There is no backup servicer ready to assume all the functions of portfolio servicing if the originator bank goes bankrupt, its banking license is withdrawn, or it does not fulfill its contractual obligations. In this case, if the Bank is unable to perform its functions for any reason or if the trigger for the Bank’s rating level is violated, the service agent will be replaced. The transaction is static: its structure does not provide for the inclusion of new loans in the collateral in exchange for bonds repaid within one year from the date of issue.

The transaction is neither part of the RMBS Factory program of JSC “DOM.RF” (ACRA rating: AAA(RU), outlook Stable), nor organized according to STS securitization standards; it includes no coverage of any losses at the expense of the government’s budget and/or external guarantees from third parties.

ISSUER

The Issuer is a mortgage agent, a statutory defined bankruptcy remote special purpose vehicle incorporated as a limited liability company in compliance with the statutory requirements outlined in Federal Law No. 152 “On mortgage-backed securities”. The Issuer’s only two purposes are the acquisition of receivables arising from mortgage loans backed by residential real estate and/or mortgage certificates, and the issuance of mortgage-backed securities.

RATING COMPONENTS

The expected credit rating reflects ACRA’s opinion on the expected losses investors are exposed to by the notes’ legal final maturity. In accordance with the Methodology for Assigning Credit Ratings to Structured Finance Instruments and Obligations under the National Scale for the Russian Federation, ACRA conducted its analysis in two stages. Firstly, ACRA estimated that the expected loss (EL) of the mortgage loan portfolio is equal to [1.44]% and the GRASP AAA EL is equal to [15]%. Secondly, the portfolio metrics were used as input parameters in modeling the structure of the Issuer’s obligations and determining the expected losses on the rated notes, taking into account the impact of credit enhancement mechanisms, expected prepayments and other factors impacting cash flow distribution in the transaction. The estimated expected loss on the class A notes over the life of the transaction is [0.03036]%.

analyzed portfolio properties

MORTGAGE portfolio analysis

The most significant factors that determined the portfolio’s expected losses are:

• The relatively high size of the excess spread stemming from the significant difference between the weighted average interest rate on the asset portfolio and the size of the coupon for the rated notes;

• Extremely low weighted average loan-to-value ratio [30.92]%;

• Low weighted average seasoning of the loans comprising the securitized portfolio: [15] months;

• Hybrid nature of assets in the securitized portfolio, which combines consumer and mortgage lending components;

• Absence of official income verification via 2-TIPI and/or 3-TIPI forms for 100% of the borrowers in the securitized portfolio; the Bank does not use classical forms to assess the borrower’s income and uses its own methodology;

• Presence of borrowers with negative credit histories in the securitized portfolio. the Bank uses its own model to assess the probability of default on the loan.

ISSUE STRUCTURE ANALYSIS

The rated notes benefit from subordination, i.e. the priority of payments for the class A notes is determined by their seniority against the Issuer’s obligations for the B class notes, which are subordinated to class A notes. The aggregate volume of credit enhancement for the rated class A notes, formed by tranche B, is [10]% of the asset portfolio. The notes benefit from additional credit enhancement in the form of the Special Purpose Reserve Fund (SPRF) with a hybrid structure, which was created on the issue date in the amount of [3]%, is replenished from the payment waterfall by [3]% and is [6]% financed under the credit line agreement, from the volume of the issue of class A bonds. The SPRF may be amortized in proportion to the amortization of the notes up to a minimum limit equal to [1]% of the initial volume of the note issue, subject to the conditions specified in the issue documentation. During the entire life of the transaction, the SPRF will be one of the main sources of liquidity to offset temporary short-term insufficiencies of interest proceeds available to cover the Issuer’s interest payments for the notes 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 notes, 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 notes at the request of noteholders, the SPRF can be used to compensate for insufficient principal proceeds in order to repay the rated notes.

According to the transaction’s priority of payments, the cash flows will be allocated via a simple sequential payment waterfall. The principal proceeds from the mortgage loans will be used to repay the principal due on the notes. Repayment of class B notes only takes place after the full repayment of the class A notes. In ACRA’s opinion, this arrangement will allow for the timely payment of interest and the ultimate payment of the principal on the class A rated notes until their legal final maturity stipulated by the issue documentation.

Potential rating change factors

A negative rating action may be prompted by developments that include the following:

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

• Increase in payment delinquencies and losses in the portfolio at levels exceeding those modelled as part of the analysis;

• Unforeseen legislative changes that negatively affect the transaction;

• Inability to replace the Account Bank upon a downgrade of its long-term creditworthiness rating.

Regulatory disclosure

The expected credit rating has been assigned to the issue of LLC “MA TB-7” based on the following methodologies: 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.

An expected credit rating of the class A notes assigned under the national credit rating scale for the structured finance sector for the Russian Federation has been published for the first time.

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

The credit rating was assigned based on data provided by TBank and LLC “MA TB-7”, information from publicly available sources, and ACRA’s own databases.

The expected credit rating is solicited and TBank and LLC “MA TB-7” participated in its assignment.

In assigning the expected 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 LLC “MA TB-7” during the year preceding the rating action.

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