February 27, 2013 / 9:52 AM / 5 years ago

TEXT-Fitch rates Platinum Trust February 2013-Tranche II 'BBB-(EXP)sf'; outlook stable

(The following statement was released by the rating agency)

Feb 27 - Fitch Ratings has assigned Platinum Trust February 2013-Tranche II Series A pass-through certificates (PTCs) expected rating as follows:

INR3,097m Series A PTCs due June 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 commercial vehicles loans denominated in Indian rupee (INR) originated by Cholamandalam Investment and Finance Co. Ltd (CIFCL), which is also the servicer.

Key Rating Drivers

The rating is based on credit enhancement (CE) of 9.3% of the initial principal balance, the origination, servicing, collection and recovery expertise of CIFCL, 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 will be a cash collateral in the form of fixed deposits provided by CIFCL

- 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, IDBI Trusteeship Services Limited.

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. 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+(EXP)sf’.

The collateral pool to be assigned to the trust at par had an aggregate outstanding principal balance of INR3,097m and consisted of 8,335 loans as of 31 January 2013. The collateral pool has a weighted average (WA) loan-to-value ratio of 86.5%, and a WA seasoning of 13 months. The pool

is solely made up of prime commercial vehicle loans. The pool has 17.2% of loans in the 1-30 days past due bucket, with overdue amounts representing over 5% of the monthly instalment. At closing, CIFCL 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.

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