On December 12, 2014, Absolut Bank announced the successful completion of a unique securitisation of mortgage assets, under which the senior bonds were rated as investment grade by international agencies Moody’s and Standard & Poor's. The Banking & Finance, Capital Markets Practice team of Egorov Puginsky Afanasiev & Partners acted as legal advisor to Absolut Bank providing full legal support on a transaction which is unique for the Russian financial market.
The transaction involved the placing of mortgage-backed bonds of two tranches, senior and junior, by an SPV (mortgage agent). With the assistance of legal structuring by Egorov Puginsky Afanasiev & Partners, the senior bonds were rated by Moody’s (Baa3 (sf)) and by S&P (ВВВ– (sf)). The senior bonds have been listed on the MICEX Stock Exchange and successfully placed by public offering. The junior bonds have been placed by private offering in favour of Absolut Bank, acting as the originating bank that partially undertakes the transaction-related risks.
Investment-grade ratings for the senior bonds were ensured through the inclusion of additional protections against the bankruptcy risk of the mortgage agent. Most agreements entered into by the mortgage agent, as well as the bond issuance documents, prohibit the mortgage agent's counterparties bringing a bankruptcy claim against the mortgage agent for so long as the senior bonds have not been redeemed.
The Banking & Finance, Capital Markets Practice team of Egorov Puginsky Afanasiev & Partners, including Senior Associate Oleg Ushakov and Associate Nadezhda Morgunova supervised by Partner and Head of the Practice, Dmitriy Glazounov, advised Absolut Bank on the transaction.
“This deal sets a precedent for securitisation transactions in Russia as, in the course of its implementation, we applied new Russian legislation that enshrines international securitisation best practice and key principles, such as non-petition. Largely owing to this the bonds have been rated by two of the largest ratings agencies Moody’s and S&P, which is unique for the Russian financial market”, says Dmitriy Glazounov.