Moody's puts Gazprombank Mortgage Funding notes on review
MOSCOW. Jan 22 (Interfax) - Moody's Investors Service taken rating action on the notes issued by Gazprombank Mortgage Funding 2 S.A. ("Gazprombank 2007-1"), the agency said in a press release:
Class A1, Placed on review for possible downgrade; previously on March 6,
2009 Downgraded to B3;
Class A2, Placed on review for possible upgrade; previously on March 6,
2009 Downgraded to B3;
Class B, Placed on review for possible upgrade; previously on March 6,
2009 Downgraded to Caa3;
Class C, Placed on review for possible upgrade; previously on March 6,
2009 Downgraded to Caa3.
The rating action is prompted by the announcement of the noteholder meeting to be held on January 22nd whereby the noteholders will be required to vote on an extraordinary resolution. According to the proposed extraordinary resolution the terms and conditions of the class A1 notes will be amended so that from the interest payment date falling on the 25th of January 2009 the class A1 notes will be converted from RUB to EUR at an exchange rate of 1 EUR to 34.7 RUB. This corresponds to the exchange rate at closing of the transaction and it is significantly more favourable than the current prevailing foreign exchange spot rate.
In this transaction Lehman Brothers Holding Inc. ("LBHI") was the guarantor for both the swap provider and the liquidity facility provider and therefore Gazprombank 2007-1 is currently fully exposed to foreign exchange and interest rate risk and does not benefit from any liquidity source other than the cash reserve fund. In March 2009 Moody's downgraded all classes of notes assuming that the Issuer will not find a replacement swap and will be exposed to the foreign exchange spot rates until maturity.
Moody's notes that if the extraordinary resolution will pass the class A1 notes will crystalize a principal loss of approximately 14% due to the local currency depreciation from closing. In addition the transaction will no longer be exposed to currency risk and therefore the other classes of notes will benefit from the redenomination of the class A1 notes. Hence Moody's has placed on review for downgrade the class A1 notes and has placed on review for upgrade the other notes.
Gazprombank was Russia's third largest bank by assets, according to the Interfax-100 ranking at the end of the third quarter of 2009.