(The following was released by the rating agency)
HONG KONG, February 07 (Fitch) Fitch Ratings has assigned SHRI Trust - B - 2013 pass-through certificates (PTCs) expected rating as follows:
INR2,000m Series A PTCs 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 commercial vehicles loans denominated in Indian rupee (INR) originated by Sundaram Finance Limited (SFL) which is also the servicer.
The ratings are based on the credit enhancement (CE) of 9.9% of the initial principal balance, the origination, servicing, collection and recovery expertise of SFL, 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) which is expected to be in the form of fixed deposits 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.
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 INR2bn and consisted of 3,737 loans as of 31 January 2013. The collateral pool has a weighted average (WA) loan-to-value ratio of 89%, and a WA seasoning of 18 months. New commercial vehicle loans accounted for about 94% of the pool, with the rest being used commercial vehicle loans. The pool has 14% of loans in the 1-30 days past due bucket although only 4% of loans had overdue amounts representing over 5% of the monthly instalment. At closing, SFL will assign commercial vehicles loans to SHRI Trust - B - 2013, which in turn will issue the PTCs. The PTCs proceeds will be used to fund the purchase of the underlying loans.