MIGA Newsletter, March - April 2006
MIGA is forging ahead in its efforts to harness the vast resources of the capital markets to meet the investment needs of emerging market economies, and the risk-return appetites of private investors. The agency’s recent $75 million guarantee contract with the First Kazakh Securitization Company, B.V., has been hailed by the financial press and industry pundits as a groundbreaking deal—the country’s first true-sale securitization of mortgages.
The deal involves the purchase of a portfolio of residential mortgages from BTA Ipoteka, the mortgage lending subsidiary of Bank TuranAlem, by First Kazakh Securitization Company—a special purpose vehicle funded by a multi-seller conduit sponsored by ABN Amro Bank of the Netherlands. The funds raised from investors who buy into these mortgage-backed securities will enable Bank TuranAlem to expand its mortgage lending, making the mortgage market in Kazakhstan more competitive and transparent.
MIGA supported this transaction by insuring a portion of the principal and interest payments generated by the mortgage portfolio against the risks of currency transfer restriction and expropriation for a period up to five years. MIGA’s latest pioneering deal shows the market how local borrowers can access sophisticated new forms of financing to match their funding needs. (See the press release below for more information.)
WASHINGTON, DC, February 22, 2006—The Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, announced today that it has issued $75 million in guarantee coverage to the First Kazakh Securitization Company, B.V., for a mortgage-backed securitization in Kazakhstan. MIGA is providing political risk coverage for a portion of the principal and interest payments generated by the mortgage portfolio. The deal represents the country's first such securitization, and MIGA's third capital markets transaction.
First Kazakh Securitization Company—a newly created special purpose vehicle located in the Netherlands, and funded by a multi-seller conduit sponsored by ABN Amro Bank, N.V.—purchased the portfolio of residential mortgages from BTA Ipoteka, the consumer lending subsidiary of Bank TuranAlem. MIGA's guarantees were instrumental in helping obtain international commercial paper funding for the transaction.
"This innovative capital markets transaction is the first cross-border mortgage-backed securitization in Kazakhstan and in the Commonwealth of Independent States," says Olga Sclovscaia, a senior underwriter in MIGA. "This represents an important step in the development of the country's financial sector."
The project will help increase the availability of housing finance in the country and introduce an important new capital markets instrument to the arsenal of funding sources available to Kazakhstan's financial institutions, both banks and non-banks. Developmentally, the project will improve access to mortgage financing for middle-income borrowers and contribute towards making the mortgage market more competitive and transparent.
Yukiko Omura, MIGA's Executive Vice President, adds: "This transaction is in line with MIGA's strategy to expand our product mix to meet the general needs of our clients and the growing demand for our services in the area of capital markets."
Release no. 2005/89