Moody’s Reviews Russia’s Structured Finance Market

The new Russian structured finance legislative platform is credit positive for the country’s structured finance market, according to a report by Moody’s Investors Service.

The credit ratings agency (CRA) concludes that the new framework contains the key elements required for a broad range of securitisation and project finance structures and will provide onshore alternatives to securitisation transactions that were previously possible only via offshore issuing vehicles.

“The new legislation limits the risks associated with a number of relevant laws and provides a clearer and more comprehensive legal framework for the issuance of domestic Russian structured finance transactions”, said Igor Zelezetskii, a Moody’s vice president – senior analyst.

“Many of the amendments are broadly consistent with similar legal provisions in established structured finance markets and some of them, such as the bankruptcy remoteness framework for special purpose entities (SPEs), will have positive credit implications.”

The new legislation also introduces new types of SPEs, as well as a framework for bankruptcy-remote SPEs. The laws prescribe bankruptcy remoteness criteria for SPEs, including prohibitions on borrowing from private individuals, except through issuance of bonds; and also reducing charter share capital.

“In line with the powers granted to SPEs, mortgage agents now have broader rights and obligations necessary for the performance of their activities. The legislation explicitly states that a mortgage agent can both purchase cash receivables and issue notes with collateral, removing any uncertainty regarding the issuing capacity of mortgage agents”, said Zelezetskii.

Furthermore, the legislation outlines procedures for the replacement of a bankrupt SPE and the transfer of pledged collateral to a new issuer. It also establishes professional standards and limitations for SPEs, ensuring their independence from the originator and SPE shareholders.

In addition, the new legislation strengthens two elements essential to the securitisation of assets backed by movable property. Firstly, it improves registration and access to information relevant to the movable property collateral; and secondly it increases the protection of bona fide purchasers against third parties’ claims.

“Previously, Russian law did not provide clear protection to a purchaser of collateral. The new law tries to introduce protection through encouraging greater transparency of the transfer and registration of movable property” added Zelezetskii.


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