Moody's downgrades rated tranches in Closed Joint Stock Company "Mortgage agent MTSB" and CJSC Mortgage Agent of AHML 2013-1, tranche A in CJSC Mortgage Agent VTB 2013-1 confirmed
March 23, 2015 Moody's Investors Service
London, 20 March 2015 -- Moody's Investors Service has today downgraded 3 tranches and confirmed 1 tranche in 3 Russian residential mortgage-backed securities (RMBS) transactions and concluded its review for downgrade for 2 transactions.
The list of affected ratings is at the end of the Rating Rationale section.
The rating actions follow the weakening of Russia's credit profile as reflected in Moody's decision on 20 February 2015 to lower Russia's government bond rating to Ba1, and the lowering of the local-currency
bond and deposit ceilings to Baa3 from Baa2.
For additional information on the sovereign action, please refer to the related announcement "Moody's downgrades Russia's sovereign rating to Ba1 from Baa3; outlook negative" http://www.moodys.com/viewresearchdoc.aspx?docid=PR_318857), published on 20 February 2015.
The rating action also reflects the long-term domestic bank deposit rating of MTS Bank, PJSC, formerly known as MTS Bank, OJSC (B2/NP), the long-term senior unsecured debt ratings of the Agency for Housing Mortgage Lending OJSC (Ba1/NP) and the long-term domestic bank deposit rating of VTB24 (Ba1/NP). These entities act as originators and servicers in the three transactions being considered.
In addition, in CJSC Mortgage Agent of AHML 2013-1, AHML acts as a surety provider for the senior notes. In CJSC Mortgage Agent VTB 2013-1, VTB24 acts as a provider of financial assistance.
The rating of the tranche A in Closed Joint Stock Company "Mortgage agent MTSB" is downgraded due to the increase in country risk associated with the lowering of Russia's local-currency bond ceiling to Baa3 from Baa2. The ratings of the tranches A1 and A2 in CJSC Mortgage Agent of AHML 2013-1 are downgraded based on the decrease in the local-currency bond ceiling, in conjunction with the negative effect of Agency for Housing Mortgage Lending OJSC's downgrade.
The reduction of the local-currency bond ceiling reflects an increased probability of high losses on the underlying collateral resulting from any political, economic or financial dislocation accompanying a material deterioration in Russia's credit environment.
The rating of the tranche A in CJSC Mortgage Agent VTB 2013-1 has been confirmed, as the credit enhancement in this transaction and the financial assistance provided by VTB24 are sufficient to sustain the decrease in the local-currency bond ceiling and the negative effect of VTB24's downgrade.
In our analysis, we have also taken into account the introduction of the revised bank rating methodology (http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_179038) and the revised cross-sector structured finance methodologies (http://www.moodys.com/viewresearchdoc.aspx?docid=PR_320674), including a new counterparty risk (CR) assessment. The CR assessment reflects an issuer's ability to avoid defaulting on certain obligations and contractual commitments, to include payment obligations associated with derivatives, letters of credit, third party guarantees, servicing and trustee obligations and other operational obligations. Additionally, for bank-related exposures, e.g. deposits held at a defaulting bank, Moody's now assumes a recovery rate of 45% in the instances when the risk is measured or modelled.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
Factors or circumstances that could lead to an upgrade of the ratings include (1) a reduction in sovereign risk; (2) improved performance of the underlying collateral that exceeds Moody's expectations; (3) deleveraging of the capital structures; and (4) improvements in the credit quality of the transaction counterparties.
Factors or circumstances that could lead to a downgrade of the ratings include (1) a further increase in sovereign risk; (2) underlying collateral performance that is worse than Moody's expects; (3)
deterioration in the notes' available credit enhancement; and (4) further deterioration in the credit quality of the transaction counterparties.
The principal methodology used in these ratings 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.
LIST OF AFFECTED RATINGS:
Issuer: Closed Joint Stock Company "Mortgage agent MTSB"
....RUB 3432.641M Class A Notes, Downgraded to Ba1 (sf); previously on Jun 25, 2014 Definitive Rating Assigned Baa3 (sf)
Issuer: CJSC MORTGAGE AGENT OF AHML 2013-1
....RUB 8916M Class A1 Notes, Downgraded to Ba1 (sf); previously on Jan 23, 2015 Downgraded to Baa3 (sf) and Remained On Review for Possible
....RUB 4978M Class A2 Notes, Downgraded to Ba1 (sf); previously on Jan 23, 2015 Downgraded to Baa3 (sf) and Remained On Review for Possible
Issuer: CJSC MORTGAGE AGENT VTB 2013-1
....RUB25937M Class A Notes, Confirmed at Baa3 (sf); previously on Jan 23, 2015 Downgraded to Baa3 (sf) and Remained On Review for Possible Downgrade
Country of riskRussia
Redemption (put/call option)*** (***)
М/S&P/F— / — / —
Company — Mortgage agent VTB 2013-1
Full nameClosed Joint-Stock Company "Mortgage agent VTB 2013-1"