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Rating Lowered On Class A Notes In Russian RMBS Transaction 'Mortgage Agent Absolut 3' Following Sovereign Downgrade

February 11, 2015 | Standard & Poor's

MOSCOW (Standard & Poor's) Feb. 10, 2015--Standard & Poor's Ratings Services today lowered to 'BB+ (sf)' from 'BBB- (sf)' and removed from CreditWatch negative its credit rating on 'Mortgage Agent Absolut 3' LLC's class A notes.

On Dec, 30, 2014, we placed our rating on the class A notes issued by 'Mortgage Agent Absolut 3' on CreditWatch negative following our Dec. 23, 2014 CreditWatch negative placement of our long-term foreign currency sovereign credit rating on the Russian Federation (see "Rating In Russian RMBS 'Mortgage Agent Absolut 3' Placed On CreditWatch Negative After Similar Sovereign Rating Action" and "Russian Federation Ratings Placed On CreditWatch Negative On Review Of Monetary Flexibility And Weakening Economy").

Today's downgrade follows the application of our updated criteria for rating single-jurisdiction securitizations above the sovereign foreign currency rating (RAS criteria; see "Methodology And Assumptions For Ratings Above The Sovereign--Single-Jurisdiction Structured Finance," published on Sept. 19, 2014). We applied our RAS criteria to test the transaction structure's ability to withstand a sovereign default stress, or a "severe" stress as defined by the criteria, in a 'BBB-' rating scenario, following our Jan. 26, 2015 lowering to 'BB+' of our long-term sovereign foreign currency rating on Russia (see "Russia Foreign Currency Ratings Lowered To 'BB+/B'; Outlook Negative"). At closing in December 2014, our 'BBB- (sf)' rating was constrained by the results of our cash flow analysis. Our analysis for rating above the sovereign has shown that the available credit enhancement for the class A notes is not sufficient to withstand a severe stress scenario under our RAS criteria. Consequently, as under our RAS criteria we cannot assign any ratings uplift above the sovereign rating, we have lowered to 'BB+ (sf)' from 'BBB- (sf)' and removed from CreditWatch negative our rating on the class A notes.

The transaction is exposed to counterparty risk from VTB Bank JSC as the issuer account bank. On Feb. 4, 2015, we lowered to 'BB+' from 'BBB-' our long-term issuer credit rating (ICR) on VTB Bank (see "Various Negative Rating Actions Taken On Russian Banks And Government-Related Entities Following Sovereign Downgrade"). Based on the transaction documents, the issuer managing company has to replace VTB Bank, in its role of the issuer account bank, within 60 calendar days upon the loss of a 'BBB-' rating. Should the managing company fail to replace VTB Bank, under our current counterparty criteria, our rating on the class A notes will be capped at our long-term ICR on VTB Bank (see "Counterparty Risk Framework Methodology And Assumptions," published on June 25, 2013).

'Mortgage Agent Absolut 3' is a Russian residential mortgage-backed securities (RMBS) transaction that securitizes a portfolio of ruble-denominated mortgage loans.


SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties, and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties, and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011.

Issue: Mortgage Agent Absolut 3, class A

StatusCountry of riskMaturity (option)AmountIssue ratings (M/S&P/F)
early redeemedRussia09/11/20425,922,360,000 RUB-/NR/-

Company: Mortgage Agent Absolut 3

Full company nameMortgage Agent Absolut 3 LLC
Country of riskRussia
Country of registrationRussia
IndustryFinancial institutions


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