Fitch Ratings has assigned a final rating of 'AAA(ind)(SO)' with a Stable Outlook to the purchaser payouts in a direct assignment (DA) transaction. The Mixed Commercial Vehicle (CV) loan pool assigned to the purchaser is originated by Shriram City Union Finance Co. Ltd. (SCUF, the "originator" or "seller", 'A+(ind)'/Stable).
The final rating addresses the timely payment of interest and the timely payment of principal to the purchaser by the scheduled maturity date of July 2011, in accordance with the transaction documentation. The final rating is based on the origination, servicing, collection and recovery expertise of SCUF, the legal and financial structure of the transaction and the credit enhancement provided.
The loans that are assigned to the purchaser at par have an aggregate outstanding principal balance of INR 1,874.0m and future receivables of INR 2,398.5m, as of the cut-off date of February 2009. In this transaction, the credit enhancement for the pool is in the form of a fixed deposit provided by the originator equal to 7.4% of the future receivables, and a bank guarantee from Standard Chartered Bank equal to 8.1% of future receivables at the cut off date. In each payout period, the excess spread after meeting purchaser payouts and topping up the credit enhancement will be retained by the originator. The credit enhancement is available to cover both credit risk and liquidity risk in the transaction.
As part of its analysis, Fitch built a pool cash flow model based on the financial structure of the transaction. The agency also analysed historical data to determine the base values of key variables that would influence the level of expected losses in this transaction. The base values of the default rate, recovery rate, time to recovery, collection efficiency, prepayment rate and pool yield were stressed to assess whether the level of credit enhancement was sufficient for a 'AAA(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.
Note to editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(ind)' for National ratings in India. Specific letter grades are not therefore internationally comparable.
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