home credit & finance bank securitisation of consumer loans in russia : first ever...

Home Credit & Finance BankHome Credit & Finance Bank

SECURITISATION OF CONSUMER LOANS IN RUSSIA :SECURITISATION OF CONSUMER LOANS IN RUSSIA :

FIRST EVER SECURITISATION OF RUBLE ASSETSFIRST EVER SECURITISATION OF RUBLE ASSETS

Dmitri Mosolov – Deputy Chairman of the Board

London, 13 October 2006

2Home Credit & Finance Bank

Important Notice

3 Home Credit & Finance Bank

HCFB INTRODUCTION


HCFB: fast growing consumer finance company

Second largest provider of consumer point-of-sale (‘POS’) finance and credit cards in Russia

Part of the Home Credit Group (‘HCG’) which operates in consumer finance markets in the Czech Republic, Slovakia, the Russian Federation and Kazakhstan

HCG is part of PPF Group, the largest non-banking financial services group in the Czech Republic

Launched in 2002

Major products: point-of-sale (POS) loans and revolving credit cards

Consumer loan portfolio of estimated RUR 29bn(1)

Large network of 57 representative offices and over 21,000 POS across the country

International Ratings: Moody’s Ba3/NP/D-, S&P B-/C

Note: (1) As of 1H 2006.

5,3

19,5

29,1 28,7

0

5

10

15

20

25

30

2003 2004 2005 1H2006

consumer loan portfolio (bln RUR)

Rapid growth in consumer loan portfolioRapid growth in consumer loan portfolio


STABLE & DIVERSIFIED FUNDING BASE

Note: * the issue redeemed on Oct 18, 2005

** first drawing, total Facility amount can be increased up to US$ 50m

US$ 50m Syndicated Loan Facility due 2006 (Jan ’06)

RUR 1.5bn due ‘07 (Oct ’04) * RUR 3bn due ‘10 (May ’05) RUR 3bn due ’10 (Sept ’05)

US$150m due 2008 (Jan ’05) US$275m due 2008 (Jun ’05)

US$ 25m** Loan Facility with BNP Paribas due 2006 (Nov ‘05)

DOMESTIC RUR BOND MARKET DOMESTIC RUR BOND MARKET

EUROBOND MARKETEUROBOND MARKET

BILATERAL LOANSBILATERAL LOANS

INTERNATIONAL SYNDICATIONSINTERNATIONAL SYNDICATIONS

ASSET-BACKED SECURUTISATIONASSET-BACKED SECURUTISATION

Consumer loan securitisation EUR 126.5m due 2012 (Dec ’05)

LISTING PROSPECTUS DATED 7 DECEMBER 2005

EURASIA STRUCTURED FINANCE No. 1, S.A., Compartment 1

Up to € 230,000,000 Class A-1 Consumer Loan Receivables Backed Floating Rate Notes due May 2012 Up to € 33,000,000 Class A-2 Consumer Loan Receivables Backed Floating Rate Notes due May 2012 Up to € 28,000,000 Class B Consumer Loan Receivables Backed Floating Rate Notes due May 2012

Detachable Class Z Consumer Loan Receivables Backed Coupons due May 2012 to be issued by

EURASIA STRUCTURED FINANCE No. 1, S.A., Compartment 1

A limited liability company incorporated in Luxembourg with company registration number

R.C.S. Luxembourg B 111 361

Issue Price: 100 per cent.

EURASIA STRUCTURED FINANCE No. 1, S.A., Compartment 1 is registered with the Luxembourg Commercial Register under registered number B 111 361 (the "Issuer"). The Issuer has elected in its Articles of Incorporation (Statuts) ("Articles") to be governed by the Luxembourg law of 22 March 2004 on securitisation (the "Securitisation Law"). The exclusive purpose of the Issuer is to enter into one or more securitisation transactions, each via a separate compartment ("Compartment") within the meaning of the Securitisation Law. The Issuer will issue on 8 December 2005 (the "Closing Date") € 230,000,000 Class A-1 Consumer Loan Receivables Backed Floating Rate Notes due May 2012 (the "Class A-1 Notes"), up to € 33,000,000 Class A-2 Consumer Loan Receivables Backed Floating Rate Notes due May 2012 (the "Class A-2 Notes" and, together with the Class A-1 Notes, the "Class A Notes"), € 28,000,000 Class B Consumer Loan Receivables Backed Floating Rate Notes due May 2012 (the "Class B Notes" and, together with the Class A Notes, the "Notes"), as well as the Class Z-1 Consumer Loan Receivables Backed Coupons (the "Class Z-1 Coupons") and the Class Z-2 Consumer Loan Receivables Backed Coupons (the "Class Z-2 Coupons" and, together with the Class Z-1 Coupons, the "Class Z Coupons").

One Class Z-1 Coupon will be attached to each Class A-1 Note and one Class Z-2 Coupon will be attached to each Class A-2 Note but, from date of allotment of the relevant Class A Note, the attached Class Z Coupon will detach from the Class A Note and become fully transferable independently of such Class A Note. Detachment of a Class Z Coupon from a Class A Note will have no effect on the Principal Amount Outstanding of the Class A Note and will not reduce the principal payable in respect of that Class A Note, even where the Class A Notes are redeemed prior to the Final Maturity Date.

On the Closing Date, the Issuer will allot € 100,000,000 Class A-1 Notes (the "Original Class A-1 Notes"), € 13,500,000 Class A-2 Notes (the "Original Class A-2 Notes" and, together with the Original Class A-1 Notes, the "Original Class A Notes"), € 13,000,000 Class B Notes (the "Original Class B Notes" and, together with the Original Class A Notes, the "Original Notes") as well the related Class Z-1 Coupons (the "Original Class Z-1 Coupons") and the related Class Z-2 Coupons (the "Original Class Z-2 Coupons" and, together with the Original Class Z-1 Coupons, the "Original Class Z Coupons").

LEAD MANAGER AND SOLE BOOKRUNNER

BAYERISCHE HYPO- UND

VEREINSBANK

MANAGER

PPF BANKA

Within nine months from the Closing Date, the Issuer will be entitled to allot up to a further € 130,000,000 Class A-1 Notes (the "Delayed Draw Class A-1 Notes"), € 19,500,000 Class A-2 Notes (the "Delayed Class


WHY USE SECURITISATION AS A FINANCING TOOL…?

GENERAL APPROACH TO THE DEAL:

ASSET-BACKED SECURUTISATION IS AN ESSENTIAL PART OF HCFB FUNDING STRATEGY

The securitisation deal was a well-thought-out stepThe securitisation deal was a well-thought-out step

Planned well in advance Planned well in advance

Early in 2004 two international law firms were appointed for conducting legal analysis of the securitisation matters in Russia

Early in 2004 two international law firms were appointed for conducting legal analysis of the securitisation matters in Russia

Czech experience of Home Credit a.s. securitisation was thoroughly analyzed and taken into consideration

Czech experience of Home Credit a.s. securitisation was thoroughly analyzed and taken into consideration

The deal was intended to achieve:The deal was intended to achieve:

HCFB’s funding diversification HCFB’s funding diversification

Broadening HCFB’s investor base Broadening HCFB’s investor base

Raising long-term funding at a competitive cost Raising long-term funding at a competitive cost

Certainty of getting funds in a timely manner Certainty of getting funds in a timely manner


HCFB DEBUT CONSUMER LOAN SECURITISATION:CASE STUDY


HCFB provides unsecured loans mainly to finance the purchase of household goods and consumer electronics

POS loan characteristics:

HCFB POS LOANS ASSET CLASS PROFILE

Note: (1) as of 30 June 2006.

Translated at RUR 27.0789 = 1 US$.

by loan sizeby loan size by tenorby tenorby product typeby product type

consumer loan portfolio breakdown(1)consumer loan portfolio breakdown(1)

0-30% down payment Tenor of 4 – 24 months RUR denominated Fixed rate of interest RUR 3,000 – 200,000 (US$100 – 7,000 equivalent) Repayable in equal monthly installments High interest rate (average effective interest rate 38.7% p.a.)

Photo/video

2%

Electronics22%

Com puters13%

Furniture4%

Household appliances

24%

Mobile phones

28%

Other6%

12 months22%

6 months9%

8 months7%

10 months53%

4 months3%

16 months1%

Other2%

24 months3%

POS loans target audience: mass market

As of 30 June 2006 HCFB POS loan portfolio included approximately 4 million outstanding loans

Original average maturity – 11 monthsOriginal average maturity – 11 monthsOriginal average size – US$340Original average size – US$340


TRANSACTION SUMMARY

ListingListing Irish Stock Exchange

IssuerIssuer Eurasia Structured Finance No 1, SA

Structure typeStructure type True Sale

DenominationDenomination EUR 125 000

Maturity / Call dateMaturity / Call date May 2012 / May 2009

Lead ManagerLead Manager BAYERISCHE HYPO- UND VEREINSBANK

Seller, Originator, Servicer

Seller, Originator, Servicer

Home Credit & Finance Bank

YieldYield A-1 Notes – 1mEuribor + 2.5%; A-2 Notes – 1mEuribor + 5.25%;

B Notes – 1mEuribor + 5%

Issue Size (Original Notes)

Issue Size (Original Notes)

Class A-1 Notes – EUR 100 000 000; Class A-2 Notes – EUR 13 500 000; Class B Notes – EUR 13 000 000

Transaction RatingTransaction Rating Moody’s: A-1 Notes – Baa2; A-2 Notes – Ba2; B Notes – Ba3


TRANSACTION STRUCTURE DIAGRAM

ORIGINATOR/ SELLER/

SERVICER(HCFB)

ISSUER(ESF No1,

Luxembourg)

CASH MANAGER / HEDGE

COUNTERPARTY(HVB)

LEAD MANAGER, MANAGER

(HVB, PPF Banka)

HCFB Customers

I N V

E S

T O

R S

Standby Servicer

(IMB)

Trustee & Paying Agent

(Deutsche Bank)

Corporate servicer (SFM)

Sale of Receivables

Subordinated loan

Purchase Price

Preference Share

IR & FX Hedging

Class A1 Notes

Class A2 Notes

Class B Notes


TRANSACTION KEY STAGES & TIMETABLE

March 2005

Launch of Feasibility study

September 2005

Structure Note finalized, other third parties engaged: Trustee, Corporate

servicer, Rating agency, etc.

May 2005

Key advisors appointed

December 2005

Signing & Closing

October 2005

Data analysis, system testing & administrative processes review

completed

Documentation drafting & transaction preparation

Feasibility study & Structuring Execution

Feasibility study was crucial for understanding Russian tax & legal environment, proper planning and coordination

Structuring was the most time consuming stage and took much longer period compared to other funding transactions

Execution stage involved not only extensive paperwork, but also systems adjustment and changes in operational processes


LEAD MANAGER & KEY ADVISERS ENGAGEMENT

Experience in ABS deals internationally and in CEE countries, especially in structuring & executing “first in the marketplace” deals

Experience in ABS deals internationally and in CEE countries, especially in structuring & executing “first in the marketplace” deals

Key points HCFB considered:Key points HCFB considered:

Past experience of HC Group/ PPF Group Past experience of HC Group/ PPF Group

Particular people involved in the deal Particular people involved in the deal

Having only one investments bank during the Feasibility Study & Structuring stages proves to be much more efficient in the newly developing Russian securitisation market …

Key advisors to the deal were appointed in two phases: feasibility study and structuring & execution

Strong knowledge of local specifics Strong knowledge of local specifics

This approach allowed HCFB to manage transaction in time & cost effective way! This approach allowed HCFB to manage transaction in time & cost effective way!


FEASIBILITY STUDY & STRUCTURING

INTERNATIONAL EXPERIENCEINTERNATIONAL EXPERIENCE LOCAL SPECIFICS KNOWLEDGELOCAL SPECIFICS KNOWLEDGE

ISSUES FOR STRUCTURING SOLUTION

Transaction RatingTransaction Rating

On-shore vs off-shore SPVOn-shore vs off-shore SPV

Clean True Sale legal opinionClean True Sale legal opinion

Hot Standby servicer solutionHot Standby servicer solution

Tax neutralityTax neutrality

Hedging technologyHedging technology

Commingling risk of Originator – A2 tranchCommingling risk of Originator – A2 tranch

Subordinated loan mechanicsSubordinated loan mechanics

STRUCTURE


LANDMARK HEDGING STRUCTURE

RUR denominatedshort-term Receivables with fixed interest rate

EUR denominated long-term Notes

with floating interest rate

rolling programme of EUR – RUR FX Swaps

split into 10 Swaps within a month

market rates for a variable size and duration to maturity

rolling programme of EUR – RUR FX Swaps

split into 10 Swaps within a month

market rates for a variable size and duration to maturity

rolling programme of RUR Interest Rate Swaps

duration to maturity of up to nine months with monthly payment dates

RUR notional amount declining by reference to a fixed amortization schedule

rolling programme of RUR Interest Rate Swaps

duration to maturity of up to nine months with monthly payment dates

RUR notional amount declining by reference to a fixed amortization schedule

FX HedgingFX Hedging Interest Rate HedgingInterest Rate Hedging

Benefits:Benefits:

Key objective to match asset & liabilities profiles is achieved

Rolling structure avoids back-to-back element and gives zero credit cost

Long-dated outright cross-currency swap is avoided


EXECUTION

Russian Antimonopoly Service approval

Sovereign level rating for A1 Notes obtaining

Russian currency control issues

Standby Servicer solution

MAJOR CHALLENGES - TO HANDLE “LAST MINUTE” ISSUES

Extensive transaction documentation preparation (over 20 contracts were signed)

Offering Circular completion & Notes Listing

Company’s systems adjustment & certain changes in operational processes

Transaction discussions with authorities (Russian Antimonopoly Service approval, Luxembourg tax issues, etc.)

Rating obtaining process

Closing of the deal was achieved on time and within the planned budget !Closing of the deal was achieved on time and within the planned budget !


DISTRIBUTION

HCFB PLACEMENT STRATEGY:

certainty of getting funds during the booming New

Year buying season

rather than road-show approach generally used in the Eurobond market

PRE-PLACEMENT CONCEPT

Lead Manager and Manager provided

FULL UNDERWRITING COMMITMENT

for Class A1, Class A2 and Class B Notes


SUMMARY


LESSONS LEARNED

Securitisation involves a variety of different aspects: legal & tax environment, accounting, operational procedures, IT, HR …

A diverse rage of external and company’s specialists from different levels worked on the transaction

Securitisation changes the entire work of the company: business processes, systems, reporting, etc.

Securitisation was a completely new and important experience for HCFB, which will be leveraged upon in future transactions…


TRANSACTION CREDENTIALS & PUBLICITY

FIRST EVER SECURITISATION OF RUBLE ASSETS

FIRST PUBLIC SECURITIZATION OF CONSUMER LOANS IN RUSSIA

“HCF returns with rouble ABS breakthrough, via HVBHome Credit & Finance Bank notched up a second first in the European ABS market last Friday, when it closed the first securitisation of rouble-denominated assets…”

EuroWeek, December 16 2005

“CAPITAL MARKETS & COMMODITIES: Russia achieves loan deal milestoneRussian securitisation deals are set to take a leap forward following the conclusion of a groundbreaking near-€300m deal, according to bankers and lawyers.Home Credit & Finance Bank, a Czech-owned, Russian consumer finance company, has completed the first securitisation of domestic Rouble assets from a portfolio of unsecured, small-ticket consumer loans….” Financial Times, Dec 14 2005

Best Securitisation of Emerging Market Assets


TO BE CONTINUED…


QUESTIONS & ANSWERS SESSION

THANK YOU!

home credit & finance bank securitisation of consumer loans in russia : first ever...

Documents

consumer finance markets

sale pos finance

home credit group hcg

hcfb pos loan portfolio

securitisation deal

syndicated loan facility

months rur

sale pos loans