Moody's upgrades 3 AUSFB-sponsored ABS in India

Moody's Investors Service ("Moody's") has upgraded the ratings assigned to the pass-through certificates (PTCs) of three ABS transactions backed by static pools of commercial vehicle loans and micro SME loans originated by AU Small Finance Bank Limited (AUSFB) in India.

The complete rating actions are as follows:

Issuer: India Standard Loan Trust - XXXVI

INR 413,996,721 Series A2 Pass Through Certificates, Upgraded to Baa2 (sf); previously on October 13, 2016 Definitive Rating Assigned Baa3 (sf)

Issuer: India Standard Loan Trust - XLIV

INR 686,551,547 Series A2 Pass Through Certificates, Upgraded to Baa2 (sf); previously on March 31, 2017 Definitive Rating Assigned Baa3 (sf)

 

Issuer: India Standard Loan Trust XLVIII

INR 1,185,062,031 Series A Pass Through Certificates, Upgraded to Baa2 (sf); previously on July 3, 2017 Definitive Rating Assigned Baa3 (sf)

RATINGS RATIONALE

Moody's upgrade rating action was prompted by a lowering of the operational risk related to the servicer, the increase in the available credit enhancement in the form of reserve fund benefiting the PTCs, and the good performance observed from the receivables relative to Moody's assumptions.

India Standard Loan Trust - XLIV

After the February 2018 payout, the credit enhancement available for the PTCs has increased to 13.93% of the outstanding pool balance from 9.35% at closing.

The 90+ day delinquency rate as a percentage of the original pool balance stood at 1.22% as compared to mean loss assumption of 5%.

India Standard Loan Trust XLVIII

After the February 2018 payout, the credit enhancement available for the PTCs has increased to 12.21% of the outstanding pool balance from 9.70% at closing.

The 90+ day delinquency rate as a percentage of the original pool balance stood at 0.26% as compared to mean loss assumption of 4.70%.

The lower operational risk centered on Moody's assessment of the improved credit profile of AUSFB as the servicer. 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. The improved credit profile assessment of AUSFB reduces the likelihood -- and thus the risk -- of servicer disruption arising from a potential default of AUSFB.

India Standard Loan Trust - XXXVI

After the February 2018 payout, the credit enhancement available for the PTCs has increased to 18.22% of the outstanding pool balance from 10% at closing.

The 90+ day delinquency rate as a percentage of the original pool balance stood at 0.69% as compared to mean loss assumption of 5.50%.

Factors That Would Lead To An Upgrade Or Downgrade Of The Ratings

Factors that may lead to a ratings upgrade of the three transactions 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 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 may lead to a ratings downgrade of the three 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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