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Fitch affirms Azerbaijan Mortgage Fund at 'BBB-'

16 May 2014 17:16 (UTC+04:00)
Fitch affirms Azerbaijan Mortgage Fund at 'BBB-'

By Nazrin Gadimova

International Rating Agency Fitch Ratings has affirmed Azerbaijan Mortgage Fund's (AMF) long-term foreign and local currency issuer default ratings (IDR) at 'BBB-'. The outlook is stable.

The agency made this statement on May 16.

"AMF's ratings are equalized with Azerbaijan's sovereign ratings, reflecting the entity's public sector status, its tight control by the sovereign through the central bank and its important role in the government's housing finance policy," the statement reads.

"According to AMF, the Central Bank has the duty to finance AMF (including repayment of the bonds issued), should this be needed. Fitch uses its public-sector entities rating criteria and applies a top-down approach in its analysis of AMF."

Established in September 2005 as a public sector entity, AMF aims to provide long-term financing of home ownership of Azerbaijani citizens, and to attract domestic and foreign investment into mortgage financing.

AMF reports directly to the central bank, whose management board is the fund's Board of Directors. The entity's accounts are audited by an independent auditor appointed by the central bank.

Although it has its own separate budget, AMF receives regular contributions from the state budget. AMF also benefits from a buyback guarantee for its bonds from the central bank. Fitch expects that AMF will continue to benefit from the central bank support.

AMF started to borrow through issuance of covered bonds and senior bonds in 2009. Outstanding bonds accounted for 300 million manats by late 2013, including 9 million manats held by AMF in its own portfolio. Their proceeds were solely used for mortgage portfolio expansion.

Fitch expects AMF will continue to borrow on the market and receive capital injections from the state to fund its expansion in line with the strategic plan set by the state.

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