On December 17, 2014 Sberbank Group announced a successful completion of the inaugural securitization of mortgage assets supported by the associates of Banking & Financial, Capital Markets practice team of EPAM. This is an important  transaction for the Russia’s securitization market and an encouraging example of mortgage securitization for the banking sector.

The transaction provided for offering by an SPV (mortgage agent) of three tranches of bonds secured by a pledge over a mortgage pool: two senior tranches, where the issuer’s obligations shall be performed in the same priority ranking and additionally secured with the Agency for Housing Mortgage Lending’s guarantees, and a junior tranche, where the obligations shall be performed after those under the senior-tranche bond have been discharged.

Under support of the Firm’s lawyers, the senior-tranche bonds have been offered by private subscription to the State Corporation "Bank for Development and Foreign Economic Affairs (Vnesheconombank)", and the junior tranche was  placed by private subscription to Sberbank of Russia OJSC, acting as the originating bank that partially undertakes the transaction-related risks.

The deal had the following features which impacted the content of the contractual documentation:

• the deal was made under the Vnesheconombank Program of Investments to Construction of Affordable Housing and Mortgaging;
• a non-standard procedure for creation of the reserve funds, since Sberbank of Russia’s credit facility is being considered as a special-purpose reserve;
• a non-standard procedure for senior-tranche bonds offering (exchange and off-exchange).

The transaction was supported by the Banking & Financial, Capital Markets Practice Team of EPAM, including Senior Associate Oleg Ushakov and Associate Olga Zhuravleva and supervised by Partner and the Practice Head Dmitriy Glazounov.

“This inaugural transaction for Russia’s largest state-owned bank has become a landmark deal for the whole market. Thanks to the top-level expertise of all the parties involved in this transaction and to the efficient cooperation between the Firm’s lawyers, the Agency for Housing Mortgage Lending and Sberbank Group’s subdivisions, we managed to ensure the timely completion of the transaction under the tough deadlines namely due to the need for amending the deal structure. As a result, even under the sanctions imposed on Sberbank, a transaction usually taking about half a year has been completed within 3 months of hard work”, says Dmitriy Glazounov.