Fitch Ratings has assigned a final rating of 'AA(ind)(SO)' with a Stable Outlook and a Loss Severity (LS) rating of 'LS1' to the purchaser payouts in a direct assignment (DA) transaction. The New Tractor loan pool assigned to the purchaser is originated by Mahindra & Mahindra Financial Services Limited (MMFSL, the "originator" or "seller", 'AA(ind)'/'Stable').
The final rating addresses the timely payment of interest and principal to the purchaser by the scheduled maturity date of August 2013, in accordance with the transaction documentation. The final rating is based on the origination, servicing, collection and recovery expertise of MMFSL, the legal and financial structure of the transaction and the credit enhancement provided by the originator.
The loans that are assigned to the purchaser at premium have an aggregate outstanding principal balance of INR1221.0m, and future receivables of INR1,613.3m as of the cut-off date of July 2009. In this transaction, the credit enhancement for the pool is in the form of a corporate undertaking provided by the originator, which is equal to 22.5% of future receivables as at the cut-off date.
As part of its analysis, Fitch built a pool cash flow model based on the financial structure of the transaction. In accordance with Fitch's Rating Criteria for Indian Asset Backed Securitisations, the base values of the default rate, recovery rate, time to recovery, collection efficiency and prepayment rate were stressed to assess whether the level of credit enhancement was sufficient for a 'AA(ind)(SO)' rating.
A new issue report for this transaction will be available shortly on Fitch's website, www.fitchindia.com.
Rating Outlooks have been published for all newly issued Asia Pacific Structured Finance tranches since June 2008, and concurrently with rating actions for tranches issued prior to June 2008. Unlike a Rating Watch which notifies investors that there is a reasonable probability of a rating change in the short term as a result of a specific event, rating Outlooks indicate the likely direction of any rating change over a one- to two-year period.
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Applicable Criteria available on Fitch's website at www.fitchratings.com and www.fitchindia.com: "Rating Criteria for Indian Asset Backed Securitisations", dated 14 July 2009, "Criteria for Structured Finance Loss Severity Ratings", dated 17 February 2009 and "Global Structured Finance Rating Criteria", dated 30 September 2009.
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