Fitch Assigns Debut Kazakhstan RMBS Deal Expected Ratings

Fitch Ratings-London-23 February 2007: Fitch Ratings has today assigned Kazakh Mortgage-Backed Securities 2007-1 B.V.'s Class A, Class B and Class C notes expected ratings of 'A-' (A minus), 'BBB' and 'BB' respectively. The final ratings are contingent on the receipt of the final documents conforming to information already received.

The transaction is a securitisation of first-ranking residential mortgage loans denominated in Kazakh Tenge (KZT) and indexed to USD/KZT exchange rate, together with their ancillary rights. The loans are secured on properties located in the Republic of Kazakhstan (Issuer Default Rating 'BBB' and Country Ceiling 'BBB+'). The originator and seller of the mortgage portfolio is JSC BTA Ipoteka (BTAI) incorporated under the laws of Kazakhstan and fully owned by Bank Turan Alem (BTA), the second- largest bank in Kazakhstan (IDR 'BB+'). In Fitch's view BTAI's credit quality is linked to that of its parent.

The transaction totals USD150m and represents the first publicly rated RMBS transaction from the Republic of Kazakhstan. 'We expect further activity from the leading banks in the country to support continued expansion of the banking sector, which has been seeing asset growth in excess of 50%' says Antonio Corbi, Associate Director in Fitch's Emerging Markets Structured Finance.

The expected ratings are based on the quality of the collateral, the available credit enhancement, the underwriting and servicing capabilities of BTAI, and the integrity of the legal structure of the transaction. The ratings address timely payment of interest and ultimate payment of principal in accordance with the terms of the notes. The expected ratings do not address the payment of the step-up interest on the notes, which will be subordinated to the replenishment of the reserve fund in the waterfall structure. The failure to pay step-up interest on March 2014 will not constitute an event of default under the transaction documentation.

Initial credit enhancement of 15.5% on the Class A notes will be provided by the subordination of the Class B notes (8.0%) and the Class C notes (5.0%). Further credit enhancement is available in the form of a fully funded cash reserve in the amount of 2.5% of the issuance. A liquidity facility will be made available to cover interest and senior fees shortfalls up to a limit of 5% of the outstanding balance of the notes. ABN AMRO Bank ('AA-' (AA minus)/'F1+') will provide an interest-rate swap to hedge the interest-rate risk between the fixed rate accrued by the loans and the Libor-based coupon of the notes. The transaction will benefit from a political risk insurance policy provided by the Multilateral Investment Guarantee Agency, a company of the World Bank Group ('AAA'/'F1+'), that will make available liquidity to the transaction in the event that certain risks associated with any restriction on the convertibility and transfer of hard currency out of the country are imposed by the authorities of the Republic of Kazakhstan.

The Kazakh legal system is in a state of evolution, and the legal environment governing securitisation remains untested. The assignment of the assets and their ancillary rights relies on provisions on the Kazakhstan civil law as no specific cross-currency securitisation law currently exists in the country. The transaction's legal opinions are able to confirm that the essential components of a true sale are achieved under the transaction documents. In addition, the structural features of the transaction adequately mitigate these uncertainties but the ratings are nonetheless credit-linked to the rating of the originator.