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March 28 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has assigned a rating to Platinum Trust - November 2013’s pass-through certificates (PTC) as follows:INR4,034.6m Series A PTC due December 2017: ‘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.
The rating and outlook reflect adequate external credit enhancement (CE) of 9.5% of the initial principal balance, CIFCL’s origination practices, servicing experience, and expertise in collection and recovery of commercial-vehicle loans in India. The transaction is supported by a sound legal and financial structure.
The CE is cash collateral in the form of fixed deposits - with Axis Bank and Canara Bank, both rated at ‘BBB-‘ and ‘F3’ by Fitch - 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 PTCs.
India’s economic situation has been factored into Fitch’s analysis. The 2012 vintage showed more delinquencies at 90 days past due 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 delinquencies at 90 days past due 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, as both the assets and the PTCs are fixed-rate and denominated in rupees.
The collateral pool to be assigned to the trust at par had an aggregate outstanding principal balance of INR4,035m and consisted of 15,587 loans as of 31 October 2013. The collateral pool had a weighted average (WA) loan-to-value ratio of 82.9%, a WA seasoning of 14 months and a WA yield of 14.9%. Loans for new commercial vehicles accounted for about 92% of the pool with the rest being loans for used commercial vehicles. Loans that were 1-30 days past due accounted for 10.3% of the pool, and 9.7% of the pool had overdue amounts valued at over 5% of the monthly instalment.
Based on Fitch’s sensitivity analysis, the base-case default rate would need to increase by at least 15% from the current rate, or the base-case recovery rate to decline by at least by 26%, before a rating downgrade to BB+ would be considered. The sensitivity analysis assumes that the CE and other factors remain constant.
The rating could be upgraded if the ratings of both banks holding the cash collateral are upgraded to above ‘BBB-‘ and the portfolio performance remains sound, with adequate CE that can withstand stress under a rating scenario of above ‘BBB-sf’.
CIFCL has assign commercial vehicles 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, has been published today.
Link to Fitch Ratings’ Report: Platinum Trust - November 2013