Issuer: India Standard Loan Trust - XXII
.... INR277,941,772 Series A2 Pass Through Certificates, Upgraded to Baa1 (sf); previously on March, 11 2016 Definitive Rating Assigned Baa3 (sf)
Issuer: India Standard Loan Trust XXX
.... INR501,667,017 Series A, Upgraded to Baa2 (sf); previously on September, 14 2016 Definitive Rating Assigned Baa3 (sf)
RATINGS RATIONALE
Moody's upgrade rating actions were prompted by a lowering of the operational risk related to the servicer, the increase in the available credit enhancement in the form of a reserve fund benefiting the PTCs, and the good performance observed from the receivables relative to Moody's assumptions.
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On the lower operational risk, Moody's says that this situation is due to the improved credit profile of AUSFB as the servicer. Moody's points out that AUSFB's servicing of these securitized portfolios involves the collection of a portion of the loan payments in person and in cash from borrowers who are located across India. Consequently, AUSFB's improved credit profile reduces the likelihood and therefore the risk of servicer disruption arising from a potential default of AUSFB.
India Standard Loan Trust - XXII
The upgrade to Baa1 (sf) from Baa3 (sf) for the rating assigned to the PTCs of India Standard Loan Trust -- XXII is due to the significant increase in credit enhancement available following the pay down of the PTCs.
After the March 2018 payout, the level of credit enhancement supporting the PTCs increased to 35.8% of the outstanding pool balance from 10.0% at deal close. This level of credit enhancement provides sufficient mitigation to the likely significant increase in losses on loans requiring in-person collections in a scenario where a default of AUSFB leads to a disruption in the servicing of loans.
Moody's has also considered the impact on the PTCs from various first credit enhancement reset scenarios by the originator. The reset mechanism and criteria are defined under the Reserve Bank of India's guidelines.
The performance of the transaction has been within Moody's expectations since closing. As of the March 2018 payout, the 90+ day delinquency rate as a percentage of the original pool balance stood at 1.22% versus the mean loss assumption of 4.00% at closing.
India Standard Loan Trust XXX
Since closing, the level of credit enhancement supporting the PTCs has increased to 25.0% of the outstanding pool balance from 10.0% at deal close.
Moody's has also considered the impact on the PTCs from various first credit enhancement reset scenarios by the originator. The reset mechanism and criteria are defined under the Reserve Bank of India's guidelines.
The performance of the transaction has been within Moody's expectations since closing. As of the March 2018 payout, the 90+ day delinquency rate as a percentage of the original pool balance stood at 0.71% versus the mean loss assumption of 4.50% at closing.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
Factors that could lead to a ratings upgrade of India Standard Loan Trust XXX include: (1) an increase in the level of credit enhancement that is sufficient to mitigate the expected significant increase in losses pertaining to loans requiring in-person collections in a scenario where there is a disruption in servicing upon a default of AUSFB; (2) a further reduction in the operational risk in the transactions arising from a further improvement in Moody's assessment of the credit profile of the servicer; and/or (3) an improvement in performance of the securitized pool compared to Moody's initial expectations.
Factors that could lead to a ratings downgrade of the two transactions include: (1) an increase in the operational risk in the transactions arising from a deterioration in Moody's assessment of the credit profile of the servicer or other transaction counterparties; and/or (2) a deterioration of the securitized pool performance that is worse than Moody's assumptions.
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