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EBRD: Understanding the Drivers for EBRD: Understanding the Drivers for
Russian Asset SecuritisationRussian Asset Securitisation
Tõnu PekkTõnu Pekk
Principal BankerPrincipal Banker
Structured Finance and SecuritisationStructured Finance and Securitisation
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AgendaAgenda
Introduction to EBRD
– EBRD’s Role in the Financial Sector
– Experience in Financing Securitisable Assets
Securitisation in Russia
– Drivers for Securitisation
– Forecast for 2007
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Introduction to EBRDIntroduction to EBRD
International financial institution established in 1991, owned by 60 national and 2 supranational shareholders
Shareholders include CEE, CIS and EU member states, USA, Canada, Japan, Australia, New Zealand, EU and EIB
Promotes market-based economies in 29 countries from Central Europe to Central Asia; provides debt and equity financing to both state and private sector projects
Representative offices in all countries of operation Capital base of € 20 billion
15 successful years of operation
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EBRD’s Role in the Financial SectorEBRD’s Role in the Financial Sector
Promote market-based financial institutions and contribute to institution building
Support private and entrepreneurial initiatives, acting as a door opener for local and western investors
Engage in policy dialogue with operators and authorities to strengthen regulatory/legislative frameworks and enhance overall corporate governance and institutions
Support the development of local capital markets, new securities and the access to secondary market refinancing
EBRD provides value-added support
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EBRD’s Experience in Financing EBRD’s Experience in Financing Securitisable AssetsSecuritisable Assets
Leasing - Portfolio of loans to finance leasing companies throughout the region in excess of € 500 million
Mortgage - Portfolio of loans to both commercial banks and specialist mortgage institutions throughout the region also in excess of € 500 million
Introduction of EBRD’s Minimum Standards and Best Practices for mortgage lending with the objective of standardising mortgages to facilitate market transactions
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EBRD’s Experience in Financing EBRD’s Experience in Financing Securitisable Assets (continued)Securitisable Assets (continued)
Consumer Finance - Portfolio of loans to consumer finance institutions in the region; key criteria for selecting best market operators in terms of lending practices and transparency
Other Assets - Significant lending to SMEs; trade finance receivables
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EBRD Approach in Securitisation and EBRD Approach in Securitisation and Structured Finance – Completed DealsStructured Finance – Completed Deals
Poland
€25 million and $25 millionMortgage bond framework
April 2002
Purchase of ($ and €) mortgage bonds from Poland’s
largest mortgage bank
Poland
€25 million and $25 millionMortgage bond framework
April 2002
Purchase of ($ and €) mortgage bonds from Poland’s
largest mortgage bank
Russia
€250,000,000Securitisation of Russian
consumer loans
November 2005
€8,500,000Mezzanine notes
Russia
€250,000,000Securitisation of Russian
consumer loans
November 2005
€8,500,000Mezzanine notes
Russia
€300,000,000 Securitisation of Russian
consumer loans
April 2006
€30,000,000Hybrid notes
€10,000,000Mezzanine notes
Russia
€300,000,000 Securitisation of Russian
consumer loans
April 2006
€30,000,000Hybrid notes
€10,000,000Mezzanine notes
Russia
€220,000,000Securitisation of Russian auto
loans
November 2006
€20,000,000Junior notes
Russia
€220,000,000Securitisation of Russian auto
loans
November 2006
€20,000,000Junior notes
Russia
$403,000,000
Securitisation of Russian auto loans
October 2006
$15,000,000Junior notes
$20,000,000Commingling risk facility
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Securitisation in RussiaSecuritisation in Russia
2006 Volume ($m)
2005 Volume ($m)
Volume Change %
2006 # of Transactions
2005 # of Transactions
Deal # Change %
3,475 198 1,754% 12 2 500%
Transaction Volume:
Assets Types:
39%
22%
14%
13%
11% 1%
Future Flow
Auto
RMBS
Lease Receivables
Consumer Loans
Other
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Reasons for SecuritisationReasons for Securitisation
Lower funding costs
Better asset-liability match
Lower capital requirements
High set-up cost
Size limitations
Negative side-effects (covenants on existing finance)
Advantages: Disadvantages:
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Lower Funding CostsLower Funding Costs
Margin over LIBOR/EURIBOR of recent securitisation deals
RSB I (consumer finance)
A1165 bp RSB II (auto) A 115 bp
B 155 bp MDM (auto) A 110 bp
B 165 bp
70-100 bp on recent 18-month syndicated loans
> 250 bp over swap rate in 3-year Eurobonds
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Better Asset-Liability MatchBetter Asset-Liability Match
Deposits still unreliable
Increase in volumes Increase in mismatch
Longer maturities Loan market cannot match
Increase in sophistication in risk management – Realisation of inherent risks in the asset portfolios:
prepayment risk, interest rate risk etc.
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Lower Capital RequirementsLower Capital Requirements
Capital adequacy in Russia:
especially beneficial for better quality assets
Equity Requirements:
Examples: Securitised On balance sheet
RSB (Consumer loans) 7.2 %
12.5 %
6 %
6.25 %
10 %10 %
10 %
10 %
RSB (auto loans)
MDM (auto loans)
CMB (RMBS)
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Costs & Size LimitationsCosts & Size Limitations
Even small deals made to work
Size of eligible portfolios increased due to asset growth:
– Mortgages: market doubled every year from 2002 to exceed $10 billion by the end of 2006
– Consumer finance: The volume of Russian consumer loans has grown from $36 billion at the end of 2005 to $66 billion through September 2006
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What to expect in 2007?What to expect in 2007?
More of the same: – 10+ mandates given
Domestic deals: – launch of the first public onshore RMBS
Synthetic deals: – first CDOs (regional)
Moving upstream:– Warehouse structures
– Permanent conduits
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EBRD Structured Finance and EBRD Structured Finance and Securitisation ContactsSecuritisation Contacts
Kurt GeigerBusiness Group DirectorFinancial Institutions
Tel: Fax:
Email:
+44 20 7338 7143+44 20 7338 7380
Jonathan WoollettDirector, Structured Finance & Securitisation
Tel:Fax:
Email:
+44 20 7338 6638+44 20 7338 6105
Grant Metcalfe-Smith Tel: +44 20 7338 7853Head, Client Services Fax: +44 20 7338 7880Treasury
Email:: [email protected]
Financial Institutions Group Treasury
Tõnu PekkPrincipal Banker, Structured Finance & Securitisation
Tel:Fax:
Email:
+44 20 7338 7516+44 20 7338 6199
