Senior tranche issued in this static RMBS transaction is affirmed at AAA(ru.sf) due to collateral portfolio quality and credit enhancement mechanisms.
- The credit rating assigned to Residential Mortgage-Backed Fixed Rate Notes due December 10, 2045 (the current balance: RUB 5,259 mln) has been affirmed at AAA(ru.sf).
The Junior Subordinated Loan was not rated by ACRA.
Ratings
As a part of the previous rating action (12/3/2018), ACRA assigned the definitive credit rating AAA(ru.sf) to the above notes. In compliance with the standard procedures, ACRA has reviewed the credit rating within one year after the rating assignment date.
LLC «MA BSPB 2» (hereinafter, the Issuer) issued the notes secured by the portfolio of residential mortgage loans issued by «Bank «Saint-Petersburg» PJSC (A(RU), outlook Stable) (hereinafter, BSPB or the Bank).
Transaction
The Issuer issued ruble denominated fixed rate notes. Proceeds from the issue were used to purchase the portfolio of mortgage loans originated by BSPB. Mortgage receivables acquired by the Issuer form part of the mortgage security for the notes. The main source of payments on the rated notes includes repayments from the underlying mortgage borrowers.
The transaction is the Bank’s first structured finance transaction that received a credit rating, and the second securitization transaction concerning mortgage loans granted by BSPB. The securitized mortgage portfolio comprises ruble denominated Russian residential mortgage loans serviced by the Bank. PJSC Rosbank (AAA(RU), outlook Stable) 1 will act as the backup servicer, ready to service the portfolio in case of untimely or poor services by BSPB, its bankruptcy, or withdrawal of its banking license. The transaction is static: no new loans will be introduced into the securitized portfolio until notes reach maturity.
The transaction is not part of the RMBS Factory program of JSC "DOM.RF" (ААА(RU), outlook Stable); it is not based on principles of self-certification or minimization of independent analysis as part of STS securitization standards, and it sets forth no coverage of any losses at the expense of the government budget and/or external guarantees from third parties.
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1 Prior to its reorganization through merger with PJSC Rosbank, DeltaCredit Bank JSC acted as the backup servicer.
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 the Russian Federal Law No.152 “On Mortgage Backed Securities.” The Issuer’s only two purposes are the acquisition of receivables arising from the mortgage loans backed by residential real estate and the issuance of mortgage backed securities.
Rating components
The credit rating reflects ACRA's opinion on the expected losses posed to investors by the notes’ legal final maturity. In accordance with the Methodology for Assigning Credit Ratings to Structured Finance Instruments and Obligations on the National Scale for the Russian Federation, ACRA conducted its analysis in two stages. Firstly, ACRA estimated that the expected loss of the mortgage loan portfolio is equal to 1.90% and the GRASP AAA Expected Loss (EL) is equal to 16.05%. 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.
Mortgage portfolio
The most significant rating-relevant factors include:
- Low weighted average loan-to-value ratio (40.1%);
- Strong performance demonstrated by the securitized portfolio: since the rating assignment date, the cumulative default rate reached 0.47% of the portfolio principal as of the transaction closing date;
- Positive credit history for most borrowers: 98.7% of loans have never been in arrears for more than 30 days, and 99.7% of loans have never been in arrears for more than 90 days.
Issue
The rated notes benefit from subordination, i.e. the priority of note payments is determined by their seniority against other obligations of the Issuer. The subordination of the rated notes is provided by the subordinated loan granted by Bank to the Issuer to cover a portion of the securitized portfolio purchase price. As of the rating affirmation date, the subordination level is 11.09%; the subordination level has increased from 8% to 11.09% due to the partial early amortization of the rated notes. The notes benefit from additional credit enhancement in the form of the Special Purpose Reserve Fund (SPRF) (5.3% of the initial rated issuance). The SPRF may be drawn down in proportion to the par value of the rated notes, subject to the floor amount equal to 1% of the issue volume and provided that the draw down criteria are met. During the entire life of the transaction, the SPRF will be one of the main sources of liquidity mitigating against temporary short-term delinquencies in interest proceeds available to cover Issuer’s senior expenses as well as senior note interest payments. In certain situations, the SPRF may also be a source of credit support 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 insufficient principal proceeds in order to fully repay the rated notes.
According to the transaction’s priority of payments, the cash flows will be distributed via a simple sequential payment waterfall. The principal proceeds from the mortgage loans will be used to repay principal due on the notes. In ACRA's opinion, such an arrangement will allow for the timely payment of interest and the ultimate payment of principal on the notes until their legal final maturity.
Potential outlook or rating change factors
A negative rating action may be prompted by the developments that include the following:
- Deterioration of the macroeconomic environment beyond the stresses used in the rating analysis;
- Increase in the short term payment delinquencies and/or losses in the portfolio, at the levels exceeding those modelled as part of the analysis;
- Unforeseen legislative changes negatively affecting the transaction;
- Inability to replace the Issuer’s Account Bank upon its downgrade.
Regulatory disclosure
The principal methodology used to assign the definitive credit rating was the “ACRA Methodology for Assigning Credit Ratings to Structured Finance Instruments and Obligations on the National Scale for the Russian Federation.”
The credit rating assigned to the mortgage-backed notes issued by LLC «MA BSPB 2» was first published on December 4, 2018. The credit rating is expected to be revised within one year following the publication date of this press release.
The credit rating was assigned based on the data provided by «Bank «Saint-Petersburg» PJSC, information from publicly available sources, as well as ACRA’s own databases. The credit rating is solicited, and «Bank «Saint-Petersburg» PJSC participated in the rating process.
No material discrepancies between the provided information and the data officially disclosed by «Bank «Saint-Petersburg» PJSC in its financial statements have been discovered.
ACRA provided additional services to «Bank «Saint-Petersburg» PJSC. ACRA provided no additional services to LLC «MA BSPB 2». No conflicts of interest were identified in the course of the credit rating process.
