(The following statement was released by the rating agency)
Jan 30 - Fitch Ratings has assigned Indian Receivable Trust January 2013 B pass-through certificates (PTC) expected ratings as follows:
INR837.2m Series A1 PTC due March 2014: ‘BBB-(EXP)sf’; Stable Outlook
INR763.0m Series A2 PTC due March 2015: ‘BBB-(EXP)sf’; Stable Outlook
INR495.3m Series A3 PTC due February 2017: ‘BBB-(EXP)sf’; Stable Outlook
The final ratings are contingent upon the receipt of final documents conforming to information already received.
The transaction is a static securitisation of new commercial vehicles loans denominated in Indian Rupee (INR) originated by Tata Motors Finance Limited (TMF) which is also the servicer.
The ratings are based on the credit enhancement (CE) of 14.3% of the initial principal balance, the origination, servicing, collection and recovery expertise of TMF, as well as the legal and financial structure of the transaction. The ratings address timely payment of interest and principal in accordance with the payout schedule in the transaction document.
The CE will comprise a first loss credit facility (FLCF) and a second loss credit facility (SLCF). The FLCF is expected to be in the form of fixed deposits provided by TMF - held with a bank rated at least ‘BBB-’ and ‘F3’ by Fitch - in the name of the originator with a lien marked in favour of the trustee. The SLCF is expected to be initially in the form of fixed deposits provided by TMF and subsequently be replaced by an irrevocable & unconditional guarantees provided by a bank rated at least ‘BBB-’ and ‘F3’ by Fitch.
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 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.
The collateral pool to be assigned to the trust at par had an aggregate outstanding principal balance of INR2.1bn and consisted of 2,931 loans as of 31 December 2012. The collateral pool has a weighted average (WA) loan-to-value ratio of 91%, and a WA seasoning of 10 months. New commercial vehicle loans accounted for 100% of the pool. The pool also has 21% of loans in the 1-30 days past due (dpd) bracket although only 5% of loans had overdue amounts representing over 5% of the monthly instalment. At closing, TMF will assign commercial vehicles loans to the trust, which in turn will issue the PTCs. The PTCs proceeds will be used to fund the purchase of the underlying loans.