The FINANCIAL — Mumbai/Singapore-11 July 2011: Fitch Ratings has assigned Indian Infrastructure Equipment Receivables Trust July 2011's (an ABS transaction) pass through certificates (PTCs) expected ratings and Loss Severity (LS) ratings as follows:
INR1,289.05m class A1 PTC with a scheduled maturity of July 2012: 'F1+(ind)(SO)(exp)'; and INR666.42m class A2 PTC with a scheduled maturity of February 2015: 'AAA(ind)(SO)(exp)'; Outlook Stable; and Loss Severity Rating of 'LS1'.
The transaction is a securitisation of receivables from a construction equipment (CE) loan pool originated by SREI Equipment Finance Pvt Limited (SEFPL; the "originator" or "seller"; 'AA(ind)'/Negative Outlook).
The expected ratings address the timely payment of interest and principal by the scheduled maturity dates in accordance with the transaction documentation. The expected ratings are based on SEFPL's origination, servicing, collection and recovery expertise, the legal and financial structure of the transaction and the credit enhancement provided by the originator.
The loans to be assigned to the trust at par have an aggregate outstanding principal balance of INR1,955.47m and future receivables of INR2,160.63m, as of the cut-off date of 30 June 2011. In this transaction, the credit enhancement for the pool is expected to be divided into a first loss credit facility (FLCF) and a second loss credit facility (SLCF), which are expected to be provided in the form of fixed deposits in the name of the originator with lien marked in favour of the trust. The credit enhancement will be equal to 14.50% of the initial principal outstanding, consisting of an FLCF of 8.5% and an SLCF of 6.0% of the initial principal outstanding.
As part of its analysis, Fitch built a pool cash flow model based on the transaction's financial structure. 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 the current rating level.
The final ratings are contingent upon the receipt of final documents conforming to information already received.
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