Fitch Assigns Final Ratings to Two Sansar Trust Transactions.
Sansar Trust Aug 2017
INR5.91 billion Series A PTCs due July 2022: 'BBB-sf'; Outlook Stable
Sansar Trust Sep 2017 II
INR1.72 billion Series A PTCs due April 2022: 'BBB-sf'; Outlook Stable
The ratings address timely payment of interest and principal in accordance with the payout schedules in the transactions' documents. The scheduled payouts will be net of tax deducted at source on the income distributed by the trust to the PTC holders.
The notes have been issued by Beacon Trusteeship Limited and Catalyst Trusteeship Limited in their capacities as trustees of Sansar Trust Aug 2017 and Sansar Trust Sep 2017 II, respectively.
KEY RATING DRIVERS
The ratings and Outlooks reflect adequate external credit enhancement (CE) of 10.0% of the initial principal balance for both the transactions, as well as STFCL's origination practices, servicing experience and expertise in collection and recovery of commercial-vehicle loans in India, especially in the used-vehicle segment. The transactions are supported by sound legal and financial structures.
For both the transactions, the CE will comprise a first-loss credit facility (FLCF) and a second-loss credit facility (SLCF). Both FLCFs and SLCFs are in the form of fixed deposits with Axis Bank Ltd. (BBB-/Stable/F3) in the name of the originator, with a lien marked in favour of the respective trustee. The SLCFs may subsequently be replaced by unconditional and irrevocable guarantees provided by a bank rated at least 'BBB-' and 'F3' by Fitch.
The CE is assessed to be sufficient to cover the commingling risks of the servicer and the liquidity required for the timely payment of the PTCs, for both the transactions.
Fitch affirmed India's Long-Term Foreign- and Local-Currency Issuer Default Ratings at 'BBB-' in May 2017 and forecasts real GDP growth to accelerate to 7.4% in the financial year ending March 2018 (FY18) and 7.5% in FY19 (FY17: 7.1%).
Fitch has factored this macroeconomic outlook into its analysis and base-case default-rate assumptions. The default rate, default timing, prepayment rate, recovery rate and time to recovery, together with the portfolio's weighted-average (WA) yield, were stressed in Fitch's ABS cash flow model to assess the sufficiency of cash flow for timely payment at the current rating level.
No interest-rate or foreign-currency risks exist in the transactions, since both the assets and PTCs are fixed-rate and denominated in rupees.
Sansar Trust Aug 2017 transaction comprises a seasoned portfolio, with loans from 19 Indian states. The collateral pool was assigned to the trust at par; and as of the transaction closing date, it had an aggregate outstanding principal balance of INR5.91 billion and consisted of 12,357 loans to 11,813 obligors. The maximum obligor concentration was 0.07%. Fitch deems the characteristics of this portfolio to be compatible with the Global Consumer ABS Rating Criteria given that 99.8% of the loans were provided to individuals.
Sansar Trust Aug 2017's collateral pool had a WA original loan/value ratio of 73.3%, a WA seasoning of 11.5 months and a WA yield of 14.3%. Loans in the securitised pool were mostly current as of the cut-off date. Fitch gave some credit to the WA seasoning of the underlying loans.
Sansar Trust Sep 2017 II transaction comprises a seasoned portfolio, with loans from 28 Indian states. The collateral pool was assigned to the trust at par; and as of the transaction closing date, it had an aggregate outstanding principal balance of INR1.72 billion and consisted of 3,740 loans to 3,662 obligors. The maximum obligor concentration was 0.18%. Fitch deems the characteristics of this portfolio to be compatible with the Global Consumer ABS Rating Criteria given that 99.2% of the loans were provided to individuals.
Sansar Trust Sep 2017 II's collateral pool had a WA original loan/value ratio of 68.4%, a WA seasoning of 8.6 months and a WA yield of 14.3%. Loans in the securitised pool were mostly current as of the cut-off date. Fitch gave some credit to the WA seasoning of the underlying loans.
Based on Fitch's sensitivity analysis, Sansar Trust Aug 2017's rating does not change if the base-case default rate increases by 30%, or if the base-case recovery rate declines by 30%. The PTCs' rating may be downgraded to 'BB+sf' if both the base-case default and recovery rates worsen by 30% simultaneously. The sensitivity analysis assumes CE and other factors remain constant.
Based on Fitch's sensitivity analysis, the agency may consider downgrading Sansar Trust Sep 2017 II's rating to 'BB+sf' if the base-case default rate increases by 30%. The transaction's rating does not change if the base-case recovery rate declines by 30%. The PTCs' rating may be downgraded to 'BB+sf' if both the base-case default and recovery rates worsen by 30% simultaneously. The sensitivity analysis assumes CE and other factors remain constant.
The ratings may be upgraded if the ratings of the credit collateral banks holding the FLCF and the SLCF deposits and the bank providing the guarantee are upgraded to above 'BBB-' and the portfolio performance remains sound, with adequate CEs that can withstand stress at above a 'BBB-sf' rating scenario.
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.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms ("RW&Es") that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under "Related Research" below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated 31 May 2016.
For both the transactions, Fitch reviewed the results of a third-party assessment conducted on the asset portfolio information, and concluded that there were no findings that affected the rating analysis.
Fitch conducted a review of a small targeted sample of STFCL'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 pools' 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 final pool data provided by STFCL as at September 2017.
- Transaction documentation provided by STFCL as at September 2017.
- Over 10 years of static quarterly net default loan data by STFCL up to March 2017.
- Over 10 years of dynamic quarterly net default loan data by STFCL up to March 2017.
The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public.
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|Publication:||Daily the Pak Banker (Lahore, Pakistan)|
|Date:||Jan 30, 2018|
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