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Fitch Affirms Eight Shri Trust Transactions at 'BBB-sf'; Outlook Stable.

Hong Kong: Fitch Ratings has affirmed the ratings of pass-through certificates (PTCs) from eight Shri Trust transactions. The Outlooks are Stable. All the transactions are securitisations of auto loans in India originated by Sundaram Finance Limited (SFL).

A full list of rating actions follows at the end of this ratings action commentary.

KEY RATING DRIVERS

The affirmations reflect the build-up of credit enhancement (CE) and steady portfolio performance of the eight Shri Trust transactions since closing. Performance has been within Fitch's initial assumptions.

For Shri Trust I 2016, 90+ days arrears as a percentage of the original pool balance was 0.53% after 26 months of seasoning. Fitch's initial base-case default rate and recovery rate for the transaction were 2.7% and 62.7%, respectively. Weighted-average seasoning for the transaction was 36.7 months as of the end-January 2018 collection month. CE reset was requested and carried out by the originator in August 2017. An amount of INR207.9 million was released by the trustee in August 2017, and the current CE amount for this transaction is INR362.1 million. The post-reset CE amount is still sufficient to maintain the current rating of the PTCs.

For Shri Trust K 2016, 90+ days arrears as a percentage of the original pool balance was 1.79% after 24 months of seasoning. Fitch's initial base-case default rate and recovery rate for the transaction were 3.4% and 63.5%, respectively. Weighted-average seasoning for the transaction was 34.1 months as of the end-January 2018 collection month. CE reset was requested and carried out by the originator in August 2017. An amount of INR169.4 million was released by the trustee in August 2017, and the current CE amount for this transaction is INR460.6 million. The post-reset CE amount is still sufficient to maintain the current rating of the PTCs.

For Shri Trust J 2016, 90+ days arrears as a percentage of the original pool balance was 1.20% after 23 months of seasoning. Fitch's initial base-case default rate and recovery rate for the transaction were 3.2% and 62.3%, respectively. Weighted-average seasoning for the transaction was 32.6 months as of the end-January 2018 collection month. An amount of INR104.6 million was released by the trustee in January 2018, and the current CE amount for this transaction is INR316.8 million. The post-reset CE amount is still sufficient to maintain the current rating of the PTCs.

For Shri Trust L 2016, 90+ days arrears as a percentage of the original pool balance was 1.52% after 22 months of seasoning. Fitch's initial base-case default rate and recovery rate for the transaction were 2.8% and 62.7%, respectively. Weighted-average seasoning for the transaction was 30.1 months as of the end-January 2018 collection month. An amount of INR49.5 million was released by the trustee in January 2018, and the current CE amount for this transaction is INR149.4 million. The post-reset CE amount is still sufficient to maintain the current rating of the PTCs.

For Shri Trust M 2017, 90+ days arrears as a percentage of the original pool balance was 0.90% after 17 months of seasoning. Fitch's initial base-case default rate and recovery rate for the transaction were 2.6% and 61.5%, respectively. Weighted-average seasoning for the transaction was 27.0 months as of the end-January 2018 collection month.

For Shri Trust N 2017, 90+ days arrears as a percentage of the original pool balance was 0.84% after 16 months of seasoning. Fitch's initial base-case default rate and recovery rate for the transaction were 2.7% and 60.6%, respectively. Weighted-average seasoning for the transaction was 24.4 months as of the end-January 2018 collection month.

For Shri Trust P 2017, 90+ days arrears as a percentage of the original pool balance was 1.17% after 11 months of seasoning. Fitch's initial base-case default rate and recovery rate for the transaction were 3.0% and 62.6%, respectively. Weighted-average seasoning for the transaction was 21.3 months as of the end-January 2018 collection month.

For Shri Trust Q 2017, 90+ days arrears as a percentage of the original pool balance was 1.68% after 10 months of seasoning. Fitch's initial base-case default rate and recovery rate for the transaction were 2.9% and 63.1%, respectively. Weighted-average seasoning for the transaction was 18.9 months as of the end-January 2018 collection month.

Fitch affirmed India's Long-Term Foreign- and Local-Currency Issuer Default Ratings at 'BBB-' in May 2017. We forecast real GDP growth of 7.3% in the financial year ending March 2019 (FY19) and 7.5% in FY20, against 6.5% in FY18.

The default performance of the underlying pool has been stable and the ABS cash flow model was not re-run for this rating action.

RATING SENSITIVITIES

Fitch evaluated the rating sensitivities of each transaction under an increased default rate scenario and a decreased recovery rate scenario.

All the notes, except for Shri Trust P 2017 and Shri Trust Q 2017, can withstand at least a 100% rise in base-case default rates or a 100% drop in recovery rates, before a ratings downgrade may be considered. The sensitivity analysis assumes that the CE and other factors remain constant.

Fitch may consider downgrading the ratings on Shri Trust P 2017 and Shri Trust Q 2017 to 'BB+sf' if the base-case default rates increase by 100%. The notes' ratings are not sensitive to the drop in base-case recovery rates even to zero. The sensitivity analysis assumes that the CE and other factors remain constant.

The ratings of the notes are capped by the ratings of the credit collateral banks, which according to the transaction documents shall have a minimum rating of 'BBB-'. Therefore, the notes are unlikely to be upgraded to above 'BBB-sf'.

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.

DATA ADEQUACY

Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third-party assessment of the asset portfolio or conducted a review of origination files as part of its ongoing monitoring.

Prior to the transactions closing, Fitch conducted a file review of a small targeted sample of SFL's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION

The information below was used in the analysis:

Loan-by-loan data provided by SFL as of January 2018

Monthly trustee reports provided by IDBI Trusteeship Services Limited as of March 2018

The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public.

The full list of rating actions is shown below:

Shri Trust I 2016

INR732.7 million Series A PTCs due April 2020 affirmed at 'BBB-sf'; Outlook Stable

Shri Trust J 2016

INR1,052.3 million Series A PTCs due September 2020 affirmed at 'BBB-sf'; Outlook Stable

Shri Trust K 2016

INR1,154.9 million Series A2 PTCs due August 2020 affirmed at 'BBB-sf'; Outlook Stable

Shri Trust L 2016

INR553.9 million Series A PTCs due October 2020 affirmed at 'BBB-sf'; Outlook Stable

Shri Trust M 2017

INR3,069.6 million Series A PTCs due March 2021 affirmed at 'BBB-sf'; Outlook Stable

Shri Trust N 2017

INR3,213.5 million Series A PTCs due April 2021 affirmed at 'BBB-sf'; Outlook Stable

Shri Trust P 2017

INR3,078.0 million Series A PTCs due September 2021 affirmed at 'BBB-sf'; Outlook Stable

Shri Trust Q 2017

INR1,131.8 million Series A PTCs due October 2021 affirmed at 'BBB-sf'; Outlook Stable

The outstanding note balances are as at the February 2018 payment date.
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Publication:Daily the Pak Banker (Lahore, Pakistan)
Date:Jul 3, 2018
Words:1361
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