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April 14 (The following statement was released by the rating agency)
Fitch Ratings has assigned a rating to Platinum Trust - February 2014's pass-through certificates (PTCs) as follows:
INR2,550.6m Series A PTCs due June 2018: 'BBB-sf'; Stable Outlook
The rating addresses timely payment of interest and principal in accordance with the scheduled payout in the transaction document. The distribution tax will be deducted from the scheduled payout before the income is distributed by the trust to the PTC holders. The transaction document has specified that the variation in the scheduled payouts on account of deductions for the distribution tax shall not amount to any PTC event of default.
The transaction is a static securitisation of Indian rupee-denominated commercial vehicle loans originated by Cholamandalam Investment and Finance Company Limited (CIFCL), which is also the servicer.
KEY RATING DRIVERS
The rating and outlook reflect adequate external credit enhancement (CE) of 10.0% of the initial principal balance, CIFCL's origination practices, servicing experience and expertise in collection and recovery, as well as the sound legal and financial structure of the transaction.
The CE is cash collateral in the form of fixed deposits with IDBI Bank Limited (BBB-/Stable/F3) in the name of the originator with a lien marked in favour of the trustee.
The credit enhancement is deemed sufficient to cover the commingling risk of the servicer and the liquidity for the timely payment of the PTCs.
India's economic situation has been factored into Fitch's analysis. The 2012 vintage had more delinquencies that were 90 or more days past due (90+ dpd) than earlier and subsequent vintages as a result of unfavourable economic conditions in 2012. The agency has considered the heightened economic risks in India in its base-case default-rate assumptions. The default rate, recovery rate and time to recovery, together with the portfolio's weighted-average yield, were stressed in Fitch's Asia-Pacific ABS cash flow model to assess the sufficiency of cash flow for timely payment at the current rating level.
Fitch has received the latest servicer report dated March 2014, and finds that the 90+ dpd delinquencies have performed in line with other CIFCL's transactions rated by Fitch at the same level of seasoning.
No interest-rate or foreign-currency risks exist in the transaction because both the assets and the PTCs are fixed-rate and denominated in rupees.
This portfolio has been assigned to the trust at par. The collateral pool features only new vehicles and has a weighted-average (WA) seasoning of 15 months, with an aggregate outstanding principal balance of INR2,550.6m as of 31 January 2014. The pool consisted of 9,494 loans, had a WA loan-to-value ratio of 82.9%, and a WA yield of 14.6%. Loans for new light-commercial vehicles accounted for about 82% of the pool, while the rest of the pool comprised loans originated for new small-commercial vehicles. The portfolio is also geographically diversified, and exposed to 15 Indian states in terms of obligor composition.
Based on Fitch's sensitivity analysis, the base-case default would need to increase by at least 21% from the current rate, or the base-case recovery rate to decline by at least 35%, before a rating downgrade of the PTCs to 'BB+sf' is considered. The rating-sensitivity analysis assumes that the CE and other factors remain constant.
The rating could be upgraded if the rating of the bank holding the cash collateral is upgraded to above 'BBB-' and the portfolio performance remains sound, with adequate CE that can withstand stress at above a 'BBB-sf' rating scenario.
CIFCL has assigned new commercial-vehicle loans to the trust, which in turn issued the PTCs. The PTC proceeds were used to fund the purchase of the underlying loans.
An appendix to the press release, describing the representations, warranties, and enforcement mechanisms is published today.