London, January 10, 2005 — LAWFUEL -The Law News Network – White & Case acted for West LB AG and JPMorgan in the first ever public future flow securitisation of diversified payment rights (“DPRs”) in Kazakhstan, in a $300 million Floating Rate Note issue for JSC Kazkommertsbank (“KKB”). KKB is Kazakhstan’s largest bank as measured by total assets. With a securitisation law expected to be passed in Kazakhstan in the near future, the Kazakh securitisation market is predicted to grow rapidly in 2006 and 2007, as the new law will allow pension funds to tap the fast-growing leasing and infrastructure sectors and allow mortgage-backed bonds to be sold to both local and foreign investors.
“Kazakhstan is one of the leading lights of the former-Soviet Bloc, boasting one of the best financial systems in the CIS, with particularly well-developed banking and pension sectors,” explained White & Case partner David Barwise. “The development of securitisation in Kazakhstan is in its early stages, but it’s a market with huge potential and an exciting area in which we believe we will see strong future growth, as new legislation comes into force and market-leading transactions like the KKB deal push back the boundaries.”
The transaction is the latest in a string of cutting edge deals that White & Case has worked on in Russia and the CIS. Examples include recently acting for JPMorgan, ING and UBS on KKB’s hybrid tier I capital issue, the first by any bank from the former Soviet Union, and advising Merrill Lynch and Credit Suisse First Boston as Lead Managers of the first ever securitisation of credit card receivables in Russia, in a $225 million international bond issue made by Rosbank in late 2004.
Three tranches of Notes were issued in the KKB securitisation: WestLB AG and JPMorgan were Joint Lead Arrangers and Underwriters of the $200 million Series 2005A Floating Rate Notes due 2012 (the “2005A Notes”); and West LB AG was the Sole Purchaser (on a private placement basis) of the $50 million Series 2005B Floating Rate Notes due 2012 (the “2005B Notes”) and the $50 million Series 2005C Floating Rate Notes due 2012 (the “2005C Notes”). The 2005A Notes (rated AAA by Standard & Poor’s and Aaa by Moody’s), 2005B Notes and 2005C Notes (both rated BBB by Standard & Poor’s and Baa1 by Moody’s) were issued solely under Regulation S and were not listed. The Bank of New York is acting as Indenture Trustee.
The transaction, which closed on December 8 2005, is a true-sale securitisation of KKB’s dollar-denominated present and future DPRs by KKB (as originator) to Kazkommerts DPR Company (a Cayman Islands incorporated vehicle). The sale is governed by Kazakhstan law and the remainder of the transaction is governed by New York law. The DPRs are SWIFT MT100 series payment order messages which are created as a result of KKB’s role as a financial intermediary between foreign payors which send funds to KKB’s clients in Kazakhstan. DPRs included in the sale originate from transactions generated offshore, such as export-related payments, foreign direct investment payments and personal remittance payments. Such DPRs are processed through KKB’s network of correspondent banks and credited by KKB to beneficiaries’ accounts in Kazakhstan.
The White & Case team was led by London-based partner David Barwise, working closely with associate Simon Morgan and trainee Jana Zupikova in London, partner Yuriy Maltsev and associate Maxim Grekov in Almaty, and partner John Donovan in New York.