RPT-Fitch rates STFCL CV Trust Feb 2013 'BBB-sf'; outlook stable

Tue Apr 30, 2013 2:56am EDT

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April 30 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has assigned STFCL CV Trust Feb 2013 Series A pass-through certificates (PTCs) a final rating as follows:

INR4,460.5m Series A PTCs due July 2017: 'BBB-sf'; Stable Outlook The transaction is a static securitisation of commercial vehicles loans denominated in Indian rupee (INR) originated by Shriram Transport Finance Company Limited (STFC), which is also the servicer.

Key Rating Drivers

The rating is based on credit enhancement (CE) of 13.2% of the initial principal balance, the origination, servicing, collection and recovery expertise of STFC, as well as the legal and financial structure of the transaction. The rating addresses timely payment of interest and principal in accordance with the payout schedule in the transaction document.

The CE comprises a first loss credit facility (FLCF) and a second loss credit facility (SLCF). The FLCF is in the form of fixed deposits held with Axis Bank Limited (Axis, BBB-/Negative/F3) in the name of the originator with a lien marked in favour of the trustee, IDBI Trusteeship Services Limited. The SLCF is in the form of an irrevocable & unconditional guarantee provided by Axis.

Rating Sensitivities

Fitch assessed the base case default rate, recovery rate, time to recovery and prepayment rate based on the originator's historical data. These factors, together with the portfolio's weighted average yield, were stressed in Fitch's ABS cashflow model to assess whether the transaction CE level was sufficient for the current rating level. Fitch also assessed the commingling risk of the servicer and the liquidity sufficiency for timely payment of the PTCs. The transaction is not exposed to interest rate or foreign currency risks since both the assets and the PTCs are fixed-rate and are denominated in INR. Fitch also conducted rating sensitivity tests. An increase in the base-case default rate by 30%, while keeping other risk factors constant, may result in a one-notch downgrade of the PTCs to 'BB+sf'.

The collateral pool to be assigned to the trust at par had an aggregate outstanding principal balance of INR4,460.5m and consisted of 11,186 loans as of 31 December 2012.

The tranche thickness percentage (TT%), defined as the ratio of the issue size of the PTCs to the initial collateral pool balance, is 100%. The tranche thickness loss multiple, which is calculated as the TT% divided by Fitch's base case loss expectation, is 78x.

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