Developing A New Asset Class in Russia: Mortgage-Backed Securities Securitization in Russia and the CIS 13 October, 2006 London.

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Presentation transcript:

Developing A New Asset Class in Russia: Mortgage-Backed Securities Securitization in Russia and the CIS 13 October, 2006 London

ABS/MBS Markets in Russia Should Become a Large Proportion of Total Public & Private Debt  Government budget surplus  Cost advantages  Need to leverage bank’s balance sheets  Need for new high yielding assets by domestic and foreign investment community

Overview of the U.S. Mortgage Securities Market Largest sector of the U.S. fixed income market MBS can enhance portfolio performance significantly High credit quality.

Outstanding Level of US Public & Private Bond Market Debt (USD Billions) Municipal U.S.Mortgage- Corporate* FedMoneyAsset- Total Treasury (1) Related (2) AgenciesMarket (3) Backed* (4) , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , % of Total %16.07%23.56%19.75%10.32%14.09%7.58%100.00% *The Bond Market Association estimates **Denotes break in series due to the inclusion of additional source data on non-agency MBS/CMOs. (1) Interest bearing marketable public debt. (2) Includes GNMA, FNMA, and FHLMC mortgage-backed securities and CMOs and non-agency MBS/CMOs. (3) Includes commercial paper, bankers' acceptances, and large time deposits. (4) Includes public and private placements. Source: The Bond Market Association

Mortgage/Treasury/Corporate Market

Main Risks of Securitization in Russia RISKSTATUS  Legal Solved - Possibility of “true sale” - Consumer protection - Enforcement in local courts  Operational Solved - Quality of Servicing - Quality of Reporting  Credit Understood - Relatively low credit ratings of originating banks - Lack of historical default/delinquency data - No credit cycle statistics/experience  Prepayment Still Unknown - Lack of data

Did We Separate Credit Risk and Prepayment Risk? …YES!  A-FL bond carries almost entire credit risk of the senior cash flow  A-IIO bond carries almost entire prepayment risk of the senior cash flow

Structure of the CMMBS Transaction A-FL $63,127,964 B - Mezzanine Tranche $6,288,610 Subordinated Z Tranche $3,144,305 Senior Classes A-FL, A-IIO Rating: Baa3 by Moody’s A-FL - Floating Rate Coupon 1M Libor + Spread, A-IIO – Inverse Floater Mezzanine Class B Rating: B Coupon Fixed at 9.25% Pays principal after A1 & A2 are retired Subordinated Class Z No rating Structured as an accrual or “Z” bond Retained by Originator A-IIO Interest Only

OPIC Direct Loan for CityMortgage MBS 9 Supported by First Loss Note to CityMortgage Bank Moscow Senior Notes to Capital Markets Mezzanine Note: OPIC Funded Greenwich Financial Services

Deal Description Bloomberg DES

CityMortgage Senior Notes- Bloomberg Analytics

CityMortgage Mezzanine Notes- Bloomberg Analytics

Deal Description Bloomberg DES

Why is Greenwich Financial Services Involved ? Since 1995 Greenwich Financial Services has added value to a vast array of institutional investors by structuring REMIC cashflows that meet the specific parameters requested by each investor. Our MBS market experience has allowed our structuring group to tailor innovative CMO structures that fit the risk/reward profiles and funding opportunities of our clients. We are applying this expertise to the new Russian MBS market.

Contact Information Greenwich Financial Services  Bill Frey  Jaye Hohman