Fitch Assigns Final Ratings to Platinum Trust June 2016
Platinum Trust June 2016
INR2.175bn Series A1 PTCs due March 2018: 'BBB-sf'; Outlook Stable
INR0.915bn Series A2 PTCs due September 2020: 'BBB-sf'; Outlook Stable
The rating addresses timely payment of interest and principal in accordance with the payout schedules in the transaction documents. The scheduled payouts will be net of tax deducted at source on the income distributed by the trust to the PTC holders.
KEY RATING DRIVERS
The ratings and Outlook reflect adequate external credit enhancement (CE) of 10.0% of the initial principal balance, and CIFCL's origination practices, servicing experience and expertise in collection and recovery of commercial-vehicle loans in India. The transaction is supported by a sound legal and financial structure.
The CE comprises a first-loss credit facility (FLCF). The FLCF is in the form of fixed deposits with ICICI Bank Ltd. (BBB-/Stable/F3), IDBI Bank Ltd. (BBB-/Stable/F3), and Axis Bank Ltd. (BBB-/Stable/F3) in the name of the originator with a lien marked in favour of the trustee.
The CE is deemed sufficient to cover the servicer's commingling risks, payment-interruption risks, and the liquidity for timely payment of the PTCs.
Fitch affirmed India's Long-Term Foreign - and Local-Currency Issuer Default Ratings at 'BBB-' in July 2016. Fitch expects India's real GDP growth to pick up to 7.7% in the financial year ending 31 March 2017 (FY17) and 7.9% in FY18.
Fitch has factored this macroeconomic outlook into its analysis and its base-case default-rate assumptions. The default rate, default timing, prepayment rate, recovery rate and time to recovery, together with the portfolio's weighted-average yield, were stressed in Fitch's ABS cash flow model to assess the sufficiency of cash flow for timely payment at the current rating level.
No interest-rate or foreign-currency risks exist in the transaction, since both the assets and the PTCs are fixed-rate and are denominated in Indian rupees.
The transaction's underlying portfolio has an aggregate outstanding principal balance of INR3.09bn, and consisted of 4,749 loans to 4,627 obligors as of 31 May 2016. The collateral pool was assigned to the trust at par. The collateral pool had a weighted average (WA) original loan-to-value ratio of 87.3%, a WA seasoning of 17.3 months and a WA yield of 14.6%. As of the cut-off date, loans in the securitised pool were all current, with no overdue loans. Fitch gave some credit to the seasoning of the underlying loans.
Based on Fitch's sensitivity analysis, Fitch may consider downgrading the rating on the transaction to 'BBsf' if the base-case default rate increases by 30%, or to 'BB+sf" if the base-case recovery rate declines by 30%. The sensitivity analysis assumes that the CE and other factors remain constant.
The rating may be upgraded if the ratings of the credit collateral banks holding the FLCF deposits are upgraded to above 'BBB-' and the portfolio performance remains sound, with adequate CE that can withstand stress at above a 'BBB-sf' rating scenario.
At closing, CIFCL assigned commercial-vehicle loans to the issuer, which in turn issued the PTCs. The PTC proceeds were used to fund the purchase of the underlying loans.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
"A description of the transaction's representations, warranties and enforcement mechanisms ("RW&Es") that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the Appendix referenced under "Related Research" below. The Appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated 31 May 2016."
Fitch conducted a file review of 20 sample loan files focusing on the underwriting procedures conducted by CIFCL compared to CIFCL's credit policy at the time of underwriting. Fitch has checked the consistency and plausibility of the information and no material discrepancies were noted that would have an impact on Fitch's rating analysis.
Fitch reviewed the results of the agreed-upon procedures (AUP) conducted on the portfolio. The AUP reported no material errors that would have an impact on Fitch's rating analysis.
Included as an Appendix to the commentary are a description of the representations, warranties, and enforcement mechanisms.