(The following was released by the rating agency)
HONG KONG, January 15 (Fitch) Fitch Ratings has assigned Small Operator Trust 2013 pass-through certificates (PTC) final ratings as follows:
INR3,292.9m Series A1 PTC due March 2014: 'BBB-sf'; Stable Outlook
INR2,302.0m Series A2 PTC due March 2015: 'BBB-sf'; Stable Outlook
INR1,920.4m Series A3 PTC due May 2017: 'BBB-sf'; Stable Outlook
The transaction is a static securitisation of INR-denominated commercial vehicles loans originated by Shriram Transport Finance Company Limited (STF), which is also the servicer.
The ratings and Outlooks are based on credit enhancement (CE) of 13.51% of the initial principal balance, STF's origination, servicing, collection and recovery expertise, as well as the legal and financial structure of the transaction. The ratings address timely payment of interest and principal in accordance with the payout schedule in the transaction document.
The CE comprises a first loss credit facility (FLCF) of 5.31% and a second loss credit facility (SLCF) of 8.2%. The FLCF is in the form of fixed deposits held with ICICI Bank Limited (ICICI, 'BBB-'/Negative/'F3') in the name of the originator with a lien marked in favour of the trustee. The SLCF is in the form of an unconditional and irrevocable guarantee facility provided by ICICI.
Fitch assessed the base case default rate, recovery rate, time to recovery and prepayment rate based on the originator's historical data. These factors, together with the portfolio's weighted average yield, were stressed in Fitch's ABS cashflow model to assess whether the transaction CE level was sufficient for the current rating level. Fitch also assessed the commingling risk of the servicer and assessed the liquidity sufficiency for timely payment of PTCs. The transaction is not exposed to interest rate or foreign currency risks since both the assets and the PTCs are fixed-rate and are denominated in INR.
The collateral pool assigned to the trust at par had an aggregate outstanding principal balance of INR7,515m and consisted of 19,978 loans as of 30 November 2012. The tranche thickness percentage (TT%), defined as the ratio of the issue size of the PTCs to the initial collateral pool balance, is 100%.
The tranche thickness loss multiple, which is calculated as the TT% divided by Fitch's base case loss expectation, is 50.5x.