TALLINN - The Baltic-American Enterprise Fund issued $63.6 million in mortgage-backed securities in a landmark transaction that will help bring liquidity to the booming housing loan market in the Baltics.
The debt instruments were secured by $64.9 million of mortgage loans that are part of the fund's mortgage program in Latvia. They were divided into two classes: senior class A securities worth $60.1 million, or 94.4 percent of the total offering, that carried a Moody's rating of Aa2, and subordinate class B securities worth $3.6 million, which had a rating of Baa1.
The Aa2 rating assigned to the class A certificates is three rating notches above Latvia's sovereign rating of A2 assigned by Moody's.
The transaction was the first-ever securitization of Latvian mortgages and, according to Moody's Investor Services, the first mortgage-backed security issue in Central Europe.
"The offering is the first in a longer term program that aims to open the international capital markets for Baltic mortgage-backed financing," said William C. Schaub, COO of the Baltic-American Enterprise Fund mortgage program. "This work will allow also local lenders to look to funding sources beyond deposits, borrowing from parent banks or local covered bond programs."
The issue's underwriter was Wachovia Securities, the investment banking and brokerage subsidiary of the U.S.-based Wachovia Bank.
Since beginning operations in 1997, the Baltic-American Enterprise Fund's mortgage program has provided more than $220 million in residential loans to over 9,000 individuals and families residing in the Baltics.