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Russian future flows return with Alfa, MDM
Asset Securitization Report--SourceMedia (November 20, 2006)

Felipe Ossa

Before last week, a consistently muscular showing from Russia's existing assets had knocked future flows from the country out of the ring. Now two issuers, MDM Bank and Alfa Bank, are hitting back with transactions backed by diversified payment rights (DPRs). Dresdner Kleinwort Wasserstein and Merrill Lynch are joint leads on both transactions.

First up is a roughly $400 million deal from MDM, slated to price late last week after press time. With a five-year legal final and 2.5-year average life, the deal has a euro and dollar tranche. The final volume will most likely be an allocation in each denomination, according to a source close to the deal. Moody's Investors Service rated the transaction Baa3'. The agency rates the originator's long-term foreign currency deposits Ba2'.

MDM's total DPRs reached $9.8 billion in 2005, edging down from $10 billion in 2004. Collections grew briskly from 2001 through 2004, and have steadied since then, according to a Moody's report. While new to future flows, MDM has already collateralized its existing assets. In mid-October, the bank priced a $403 million, seven-year deal backed by auto loans.

Meanwhile, Alfa is prepping a roughly $500 million DPR-backed transaction, with a legal final of five years and 2.5-year average life. The structure is identical to Alfa's only other DPR deal, a $350 million transaction issued in March. Alfa's DPR flows hit $11.2 billion from January through September of this year, from $9.9 billion over the same period last year. The orders came to $14.1 billion for the full year of 2005, rising from $12.1 billion in 2004. Collections have averaged 15.9% annual growth between 2001 and 2005, according to Moody's.

A source close to the deal said that it should benefit from the increasing familiarity of investors with Russian structured finance thanks to a handful of weighty existing asset deals that have descended on the market since the beginning of the year.

A 250 million deal backed by auto loans from Russian Standard Bank was the latest one to touch down. Slated to close this week, the deal is sliced up into an A tranche totaling 133.8 million, a B piece for 35 million, a C tranche for 51.3 million and a subordinated loan sized at 30 million. The A tranche priced at 115 basis points over one-month Euribor; the B tranche at 155 basis points over Euribor; and the C tranche at 300 basis points over.

Moody's Investors Service and Standard & Poor's rated the A, B and C pieces Baa1'/'A-', Baa1'/'BBB' and Ba2'/'BB', respectively. The subordinated tranche is unrated. The A, B, and C slices have a three-year weighted average life and an 11-year final maturity.

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.



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