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Moody's has assigned definitive ratings to notes issued by CJSC Mortgage agent of AHML 2014-2, Russian RMBS

May 29, 2015 | Cbonds

London, 29 May 2015 -- Moody's Investors Service, ("Moody's") has assigned definitive long-term credit ratings to notes issued by Closed Joint Stock Company "Mortgage agent of AHML 2014-2":

....RUB 8425M Class A1 Residential Mortgage Backed Fixed Rate Notes due
2047, Definitive Rating Assigned Ba1(sf)

....RUB 4493M Class A2 Residential Mortgage Backed Fixed Rate Notes due
2047, Definitive Rating Assigned Ba1(sf)

....RUB 6459M Class A3 Residential Mortgage Backed Fixed Rate Notes due
2047, Definitive Rating Assigned Ba1(sf)

....RUB 684.78M Class B Notes were not rated by Moody's.

This transaction is the ninth securitisation of mortgages originated by the Agency for Housing Mortgage Lending OJSC ("AHML", Ba1/NP) and rated by Moody's. The portfolio consists of the Russian residential mortgage
loans serviced by AHML.

The Class A1, A2 and A3 notes benefit from an irrevocable, unconditional and validly existing surety issued by AHML (the Surety Provider). If the Issuer fails to pay interest on these notes on the interest payment date or principal on the legal final maturity the Surety Provider will be obligated to pay these amounts on the notes within the applicable graceperiod. As such, the ratings of the notes are directly linked to the senior unsecured ratings of the Surety Provider: all things being equal,
a downgrade of AHML current rating will lead to a downgrade of the notes.

The notes are also backed by the pool of fixed rate loans, denominated in Russian Roubles and secured by mortgages on residential properties located throughout the Russian Federation. All loans are secured by mortgage certificates ("zakladnaya"), which have been transferred to the issuer. The loans have been originated by a range of local regional banks and non-banking entities in accordance with standards set by AHML. AHML also performs various other roles in the transaction such as servicer,
calculation agent, and cash manager; the collection accounts are also in the name of AHML.

RATINGS RATIONALE

The ratings are based primarily on the support provided by the Surety Provider. If the Issuer does not have sufficient funds available to make interest payments due on the Class A1, A2 or A3 notes on the interest payment date or to make principal payment on these notes on the legal final maturity, the Surety Provider will be obligated to make these payments within the applicable grace period (10 days for interest and principal payments). In addition, if the Issuer announces a decision to
redeem the notes early, but is unable to do so, the Surety Provider will be obligated to perform this redemption. Finally, if the noteholders make a decision to accelerate the notes and the Issuer is unable to make the required payments, the noteholders may request these payments from the Surety Provider.

The notes are also backed by the mortgage loan portfolio, the key characteristics of which are the current weighted average loan-to-value (LTV) ratio of 44.5% based on the minimum of the purchase price and valuation (lower than that in the previous transaction, which had current LTV of 51.6%) and the fact that for all borrowers the income was verified using official tax forms.

The rating addresses the expected loss posed to investors by the legal final maturity of the notes. In Moody's opinion, the structure allows for timely payment of interest and principal with respect of the notes by the legal final maturity. Moody's ratings only address the credit risk associated with the transaction. Other non-credit risks have not been addressed, but may have a significant effect on yield to investors.

The amortizing Reserve Fund of RUB 401.24 million (2% of the initial bond balance) was partially funded at closing to the amount of RUB 140.43 million (0.7% of the initial bond balance) and the remaining balance will be funded by the excess spread. Eight quarters after issuance and subject to certain conditions being met, the reserve fund may start amortising at 2% of the outstanding note balance down to a floor of RUB 70.22 million.

The ratings are based primarily on the support provided by the SuretyProvider, and are directly linked to its Moody's senior unsecured debt rating. Accordingly, any change of such rating of the Surety Provider could cause a corresponding change to the ratings of the notes.

The principal methodology used in this rating was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in January 2015. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

The analysis undertaken by Moody's at the initial assignment of a rating for an RMBS security may focus on aspects that become less relevant or typically remain unchanged during the surveillance stage. Please see Moody's Approach to Rating RMBS Using the MILAN Framework for further information on Moody's analysis at the initial rating assignment and the on-going surveillance in RMBS.

Other Factors used in this rating are described in Key Legal and Structural Rating Issues in Russian Securitisation Transactions, published in June 2007.

Moody's mainly relied on the obligations, investigations, representations and warranties of the Surety Provider and the agents of the Issuer. No cash flow analysis or stress scenarios have been conducted as the ratings were directly derived from the rating of the Surety Provider.

Factors that would lead to an upgrade or downgrade of the rating:

Factors or circumstances that could lead to an upgrade of the ratings include (1) reduction in country risk, performance of the underlying collateral that is better than Moody's expected, (2) deleveraging of the capital structure and (3) improvements in the credit quality of the transaction counterparties.

Factors or circumstances that could lead to a downgrade of the ratings include (1) further increase in country risk, performance of the underlying collateral that is worse than Moody's expects, (2) deterioration in the notes' available credit enhancement and (3) deterioration in the credit quality of the transaction counterparties.

Issue: Mortgage Agent AHML 2014-2, class A1

StatusCountry of riskMaturity (option)AmountIssue ratings (M/S&P/F)
early redeemedRussia06/13/20478,425,000,000 RUB-/-/-

Company: Mortgage Agent AHML 2014-2

Full company nameMortgage Agent AHML 2014-2
Country of riskRussia
Country of registrationRussia
IndustryFinancial institutions

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