BalAEF MBS

completed

The project involves up to $43.0 million IFC investment in Baltic-American Enterprise Fund and/or subsidiary thereof, (BalAEF or the company) and comprises: up to $40 million IFC investment in the form of credit enhancement through a combination of :- purchase/partial guarantees of upper equity, - mezzanine and senior tranches of a cross border Mortgage Backed Securities (MBS) to be issued over the next three years by BalAEF, and,-Euro/US$ swap facilities to support MBS issuances. Under the project, IFC’s exposure will be to an off-shore Special Purpose Vehicle (SPV) which will issue Mortgage Backed Securities (MBS), to be sold to international investors. The SPV allows to achieve a true sale and bankruptcy remote structure; and under the proposed project, BalAEF will set up a securitization program which entails a series of MBS issuances for about $250 million over a three year period. The first series of approximately $60 to $80 million MBS is expected to be issued within the coming six months. The securities will be backed by a pool of US dollar and Euro-denominated mortgages generated in Estonia, Latvia and Lithuania (the Baltics). The MBS program will represent the first cross border securitization of a portfolio of residential mortgages in the region and is expected to play a significant catalytic role in the development of this market. In particular, the securitization of mortgages would provide BaLAEF with additional liquidity to originate mortgage loans significantly in excess of what the company’s limited access to long term funding base has permitted so far.