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. Last Updated: 07/27/2016

Mortgage Agency Will Sell Securities

The Mortgage Credit Agency will place its long-awaited debut issue of ruble residential mortgage-backed securities in May and is planning another deal later this year, it said Friday.

"The deal is innovative as it uses several tranches backed by a single pool of housing loans and is done under the Russian law," Alexander Semenyaka, head of the mortgage agency, told reporters.

The debut securities will be issued in three tranches backed by a single 7.8 billion ruble pool ($303 million) of housing loans denominated in rubles and issued in 55 Russian regions under common rules.

The first 2.9 billion ruble tranche, which will be placed at auction in the second half of May, is due to be rated A3 by Moody's Investor Service, the agency said.

Semenyaka declined to give yield guidance for the first tranche, suggesting investors could look at similar bonds, but did not rule out that the market might demand a premium as the issue was a market debut.

Advanced repayments of loans will primarily affect the first tranche and the agency estimates that the tranche will have an average life of 3 1/2 years.

"We believe the issue will be of high interest for Russian and foreign investors due to its expected high rating and [the mortgage agency's] high-profile on the bond market," said Eugene Belin, managing director at Citibank Russia, the issue organizer.

The second tranche, worth 264 million rubles ($10.26 million), is due to be assigned a Ba1 rating and will be placed via a closed subscription. The agency says the European Bank for Reconstruction and Development may be a buyer. The entire third tranche, worth 131 million rubles, will be bought by the mortgage agency itself.

Semenyaka said the agency planned another deal worth 10 billion rubles and potentially comprising more tranches later this year to broaden the investor base.

Federal Service for Financial Markets deputy head Vladimir Gusakov said he expected private pension funds to buy the new bond, but the law would still keep the issue out of reach of the national pension fund.

The state pension fund is only allowed to invest in a narrow range of securities with state guaranties, such as OFZ treasury bonds.

But most Russians have not switched to a private pension, meaning their pension contributions are still earning paltry returns in the national fund.

"We will work on legislation to enable the state pension fund to invest into mortgage-backed bonds that have ratings not lower than sovereign," Gusakov said.

The home loan market amounted to $10.26 billion in 2006, Semenyaka said, and is forecast to reach $11.66 billion in 2007.