ACRA ASSIGNS AAA(RU) TO THE NOTE ISSUE (RU000A10ETE2) OF LLC “SPC DOM.RF”

Credit rating rationale. The level of risk of the note issue of LLC “SPC DOM.RF” (previously known as LLC “SPC “Infrastructure Notes”; hereinafter, the Issuer) is explained by the presence of an irrevocable and unconditional guarantee from PJSC 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 RUB 10 bln notes only, and it is not ACRA’s assessment of all the issues of the notes program (hereinafter, the Program) intended to implement Resolution of the Ministry of Industry and Trade of the Government of the Russian Federation No. 25-68905-01946-Р “On the procedure for providing subsidies to PJSC DOM.RF for the purpose of reimbursing specialized project finance companies for expenses on the payment of interest (coupon) income on notes placed for the purpose of implementing investment projects for the acquisition of construction, road and municipal equipment on preferential terms based on financial leasing” and Resolution of the Ministry of Industry and Trade of the Government of the Russian Federation No. 25-68905-01947-Р “On the procedure for providing subsidies to PJSC DOM.RF for the purpose of reimbursing specialized project finance companies for expenses on the payment of interest (coupon) income on notes placed for the purpose of implementing investment projects for the acquisition of agricultural machinery and equipment on the basis of financial leasing (leasing)”, together with the “Rules for financing investment projects for the acquisition on preferential terms of construction, road and municipal equipment, as well as agricultural machinery and equipment on the basis of financial leasing (leasing) using notes of a specialized project finance company”.

ACRA did not analyze the active part (projects, loans) of the Issuer within the framework of the rules/program, but took into account the restrictions in this part established by the rules.

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 account;

• Granting the Issuer a subsidy to reimburse the cost of paying the coupon on the notes based on the size of the key rate;

• 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 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 on the notes based on the size of the key rate.

Regulatory disclosure

The credit rating has been assigned to the note issue (RU000A10ETE2) of LLC “SPC DOM.RF” based on the following methodologies: the Methodology for Assigning Credit Ratings to Financial Instruments under the National Scale for the Russian Federation to determine the credit rating of the notes issue under the national scale for the Russian Federation; the Key Concepts Used by 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.

A credit rating has been assigned to the note issue (RU000A10ETE2) under the project finance sector of the national scale for the Russian Federation 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 PJSC DOM.RF, LLC “SPC DOM.RF”, information from publicly available sources, and ACRA’s own databases.

The credit rating is solicited and PJSC DOM.RF and LLC “SPC 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 no additional services to LLC “SPC DOM.RF” during the year preceding the rating action.

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