Agency Issues $285 Million Guarantee for Mortgage Lending in Russia
MIGA’s recent guarantee to Société Générale, covering a $300 million loan to DeltaCredit, a Russian bank that specializes in mortgage lending, represents one of the latest trends in MIGA product offerings for the Europe and Central Asia region. The agency is working with banks and financial institutions in many countries in the region, including transition economies, to help meet the growing demand for residential mortgages.
Mortgage penetration in Russia is currently among the lowest in European emerging markets. In the first half of 2007, demand for mortgages more than doubled, driven in part by increasing incomes and growth in available housing. This has posed a challenge to local banks striving to provide mortgages to potential homeowners. Société Générale’s shareholder loan to DeltaCredit is financing a portion of the bank’s expansion to meet this increased demand. The loan will enable DeltaCredit to consolidate its financial position, offer more mortgages, and align its interest rates to the European average.
“While Russia’s banking sector is developing rapidly, it is still in its nascent stages when it comes to meeting mortgage demand,” says Ileana Boza, MIGA’s financial sector head. “It is important to support the expansion needs of financial institutions, especially during times of global market and credit volatility.”
DeltaCredit is Russia’s largest private provider of mortgages and will fund their expansion by using various financing sources, which may include corporate bonds, syndicated loans, and additional shareholder loans from Société Générale. The MIGA guarantee is playing a key role in this transaction, as political risk mitigation was a requirement for the shareholder loan.
This deal is MIGA’s first transaction in support of a specialized mortgage bank in Russia. The agency has also supported the expansion of other financial institutions throughout the region to help banks broaden the range of financial services available to the population. In Kazakhstan and Latvia, for example, MIGA has issued guarantees in support of residential mortgage-based securitizations. In both cases, the MIGA backing helped the notes receive ratings above the sovereign ceilings.
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