The FINANCIAL — Mumbai/Singapore-08 August 2011: Fitch Ratings has assigned final ratings to STFCL DA Mar 2011-04 (an ABS transaction) as follows:
INR800.4m purchaser payouts: 'Fitch AAA(ind)(SO)'; Outlook Stable; and
INR67.7m second loss credit facility (SLCF) of the credit enhancement: 'Fitch BBB(ind)(SO)'; Outlook Stable.
The used and new commercial vehicle and tractor loan pool assigned to the purchaser is originated by Shriram Transport Finance Co. Ltd. (STFCL, rated 'AA(ind)'/Stable).
The final rating of the purchaser payouts addresses the timely payment of interest and principal to the purchaser by the scheduled maturity date of February 2016, in accordance with the transaction documentation. The final rating of the SLCF addresses the ultimate payment of principal by the scheduled maturity date of February 2016, in accordance with the transaction documentation. The final rating is based on the origination, servicing, collection and recovery expertise of STFCL, the legal and financial structure of the transaction and the credit enhancement provided by the originator.
The loans assigned to the purchaser at par had an aggregate outstanding principal balance of INR800.4m and future receivables of INR1,208.3m, as of end-February 2011. In this transaction, the credit enhancement for the pool is in the form of guarantees provided by Infrastructure Development Finance Company Ltd (rated 'AAA(ind)'/Stable) for a first loss credit facility (FLCF) and an SLCF. The credit enhancement provided is equal to 9.26% of future receivables, consisting of an FLCF of 3.66% and an SLCF of 5.60%, as of end-February 2011
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.