OREANDA-NEWS. Fitch Ratings has affirmed the rating of one series of pass-through certificates (PTCs) from Small Operators Trust 2013. The transaction is backed by commercial-vehicle loans originated by Shriram Transport Finance Company Limited (STFCL), which also acts as a servicer for the transaction.

The rating action is as follows:
INR1.37bn Series A3 PTCs due May 2017: affirmed at 'BBB-sf'; Outlook Stable

Series A1 PTCs paid in full on 18 March 2014
Series A2 PTCs paid in full on 15 January 2015

KEY RATING DRIVERS
The affirmation reflects satisfactory asset performance and sufficient credit enhancement (CE) for the rated note. The CE has increased steadily from the closing date, driven by the rapid amortisation of the static portfolio. The CE level is 74.0% of the outstanding pool as of 15 April 2015. As the pool amortised, most portfolio characteristics have not changed materially from when the transaction closed. The pool has remained diversified in terms of geography, asset type, loan-to-value and yield. The weighted average (WA) seasoning has increased to 37 months, and the WA yield has remained fairly stable, at above 14%.

Delinquency levels have steadily declined since January 2014, with loans more than 90 days past due (90+dpd) dropping to 2.88% as of the March 2015 collection month. This improvement in asset performance was largely due to STFCL's more effective servicing practices and improvement in India's economy following a period of stress in 2013.

The CE comprises a first-loss credit facility (FLCF) and a second-loss credit facility (SLCF). The FLCF is in the form of fixed deposits with ICICI Bank Ltd. (ICICI; BBB-/Stable/F3) and IDBI Bank Ltd. (IDBI; BBB-/Stable/F3) in the name of the originator with a lien marked in favour of the trustee. The SLCF is in the form of a bank guarantee provided by ICICI. The CE has occasionally been drawn in limited amounts due to temporary shortfalls, but the CE has been completely replenished as of the March 2015 collection month.

Fitch expects the transaction's performance to remain sound in 2015, based on its expectations of India's improving economy, the continuing amortisation of the underlying portfolio, and the notes' ability to withstand default and recovery stresses well above base-case levels.

RATING SENSITIVITIES
Fitch evaluated the rating sensitivities under an increased default rate scenario and a decreased recovery rate scenario.

As the transaction has a CE of 74.0% as of the payout date of 15 April 2015, there will be no rating impact for the transaction under the most stressful default-rate scenario of 100% asset defaults or the most stressful recovery-rate scenario of no recoveries. The sensitivity analysis assumes that the CE and other factors remain constant in both scenarios.

Fitch considers the likelihood of any downgrades to be remote, based on its asset analysis and Stable Outlook on India's economy.

The rating may be upgraded if the ratings of the credit collateral banks holding the FLCF deposits and the guarantee bank providing the SLCF are upgraded to above 'BBB-' and the portfolio performance remains sound, with adequate CE that can withstand stresses at above a 'BBB-sf' rating scenario.