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Securitization: Up to $500 million in pipeline from Ukraine

Ukraine is the latest emerging market in which asset-backed securities are being issued, with both international and domestic transactions appearing in recent weeks.

Privatbank, the country’s largest financial institution, kicked off international issuance with a $180 million residential mortgage-backed securitization via UBS.

Ukraine Mortgage Finance No 1 had to overcome several obstacles that had stymied ABS issuance from the country. Primary among these was the fact that even the best Ukrainian credits still have sub-investment-grade ratings. Ba2/B rated Privatbank successfully hurdled that barrier with the help of political risk insurance from Zurich Emerging Markets Solutions, which enabled the $134 million senior tranche to achieve the Baa3/BBB– investment grade ratings necessary to attract mainstream ABS investors to a new jurisdiction. Andrew Dennis, head of ABS syndicate at UBS in London, says: "We certainly needed the PRI element to sell the senior tranche outside of a pure emerging markets investor audience." He adds that it had been sold to a mix of European and offshore US accounts looking for a diversification and yield pick-up play versus more traditional fare from continental Europe. Another hindrance to ABS issuance had been the uncertain legal environment. "Obviously the absence of a specific securitization law means you have to be a little bit more creative but we worked hard to ensure that all parties concerned were comfortable with the legal background to the deal," says Dennis.

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