ACRA ASSIGNS DEFINITIVE CREDIT RATING TO THE SENIOR TRANCHE OF NOTES TO BE ISSUED BY "SPE ALFA FACTORY PK-3" LLC

The definitive credit rating of the senior tranche to be issued under this static transaction has reached AAA(ru.sf) due to the credit enhancement provided to the senior tranche by the subordinated loan, the special purpose reserve fund (SPRF), the level of excessive yield, as well as the quality of the collateral portfolio.

RATINGS

A definitive credit rating of AAA(ru.sf) has been assigned to the planned issue of notes secured by cash claims, the maturity date is October 1, 2032, the issue volume is no more than RUB 20,000 mln.

The junior tranche, in the form of a subordinated loan, was not assigned a definitive credit rating.

TRANSACTION

Class A exchange-traded collateralized notes are planned to be issued by “SPE Alfa Factory PK-3” LLC (hereinafter, the Issuer) as part of the securitization of the portfolio of consumer loans issued by JSC “ALFA-BANK” (ACRA rating: AA+(RU), outlook Positive; hereinafter, Alfa-Bank, the Bank, or the Originator). The collateral is a portfolio of consumer loans. The main source of notes redemption is consumer loan repayments received by the Issuer.

This transaction is the third issue of notes secured by consumer loans issued by the Bank to individual borrowers, to which a definitive credit rating is assigned by ACRA. The transaction is static: no new loans may be included in the collateral in substitution of any repaid loans.

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 specialized financial company with a limited risk of bankruptcy, operating in accordance with the requirements of 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 with Alfa-Bank, as well as the issue of collateralized notes.

TRANSACTION STRUCTURE ANALYSIS

The most significant factors that determined the structure of the transaction are:

• Qualification requirements for the consumer loan portfolio: absence in the portfolio of collateral of borrowers with a negative credit history and overdue payments of more than 30 days;

• Transaction triggers;

• Level of excess yield based on a difference between the weighted average interest rate on the asset portfolio and the coupon on the rated notes;

• Triggers for substituting the account bank, the servicer, and the calculation agent;

• Historical data since January 2020 on the quality of debt servicing and on the recovery rates for the credit product included in the securitized portfolio.

ISSUE STRUCTURE ANALYSIS

The bond issue structure uses a subordination mechanism, whereby the priority of fulfilling obligations for the notes is determined by their seniority compared to the Issuer’s other obligations. The subordination of the rated notes is based on the loan for payment of a part of the purchase price of the collateral portfolio granted by the Bank to the Issuer, which amounts to 20% of the asset portfolio. Additional credit enhancement for the notes is provided by the SPRF equal to 6% of the issue volume of class A notes. The SPRF may be amortized in proportion to the amortization of the notes down to a minimum of 1% of the initial volume of the notes issue subject to 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 on the notes and, in the event of early redemption of the notes at the request of noteholders, the SPRF funds can be used to compensate for insufficient income on the principal debt to pay the nominal value of the notes to investors.

The structure of the transaction provides for a simple sequential waterfall of funds. Notes are amortized at the expense of funds received in the accounts of the Issuer in repayment of the principal amount on loans included in the collateral on the notes. In ACRA’s opinion, the structure of this transaction allows for the timely payment of coupon payments and repayment of the nominal value of the notes throughout their entire life until the legally fixed maturity date set out in the issue documentation.

RATING COMPONENTS

The assigned definitive credit rating reflects ACRA’s opinion regarding the amount of expected losses on the Issuer’s rated notes before their legally fixed maturity date. In accordance with 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, as a result of the analysis of the Issuer’s securitized assets, ACRA estimated, based on the vintage tables, the mathematical expectation of the default level on the portfolio of consumer loans (with the extrapolation of the vintages) at 12.55% and a standard deviation of 5.56%. At the second stage, the results of the vintage analysis were used as input parameters for the GRASP-WP model in modeling the structure of the Issuer’s liabilities, taking into account the credit quality enhancement mechanisms, projected recovery rates, early repayment, the amount of the SPRF, and other factors affecting the distribution of cash flows in the transaction. The estimated expected loss on the class A notes over the transaction life is 0.00061%.

CHARATERISTICS OF THE PORTFOLIO

POTENTIAL RATING CHANGE FACTORS

Events that could lead to a negative rating action include the following:

• 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 loan portfolio 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 credit rating has been assigned to the note issue (RU000A10ENP1) of "SPE Alfa Factory PK-3" 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 note issue 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 credit rating assigned to the note issue (RU000A10ENP1) under the national scale of the structured finance sector for the Russian Federation has been published by ACRA for the first time.

The credit rating is expected to be revised within one year.

The credit rating was assigned based on data provided by JSC “ALFA-BANK” and "SPE Alfa Factory PK-3" LLC, information from publicly available sources, and ACRA’s own databases.

The credit rating is solicited and JSC “ALFA-BANK” and "SPE Alfa Factory PK-3" 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 "SPE Alfa Factory PK-3" LLC during the year preceding the rating action.

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