OREANDA-NEWS. Fitch Ratings has assigned a final rating to Platinum Trust-Dec 2014's pass-through certificates (PTC) as follows:

INR3.0bn Series A PTCs due August 2019: 'BBB-sf'; Stable Outlook

The rating addresses timely payment of interest and principal in accordance with the payout schedule in the transaction documents. The scheduled payout will be net of the distribution tax on the income distributed by the trust to the PTC holders.

The transaction is a static securitisation of Indian rupee-denominated commercial-vehicle and tractor loans originated by Cholamandalam Investment and Finance Company Limited (CIFCL), which is also the servicer for the transaction.

KEY RATING DRIVERS

The rating and outlook reflect adequate external credit enhancement (CE) of 13% of the initial principal balance, and CIFCL's origination practices, servicing experience and expertise in collection and recovery of commercial-vehicle loans in India. The transaction is supported by a sound legal and financial structure.

The CE comprises a first-loss credit facility (FLCF) and a second-loss credit facility (SLCF). The FLCF is in the form of fixed deposits with Punjab National Bank (BBB-/Stable/F3) in the name of the originator with a lien marked in favour of the trustee. The SLCF is an unconditional and irrevocable guarantee provided by Axis Bank Ltd. (BBB-/Stable/F3).

The credit enhancement is deemed sufficient to cover the commingling risks of the servicer and the liquidity for the timely payment of the PTCs.

Fitch expects India's real GDP growth to pick up to 5.6% in the financial year ending 31 March 2015 (FY15) and 6.5% in FY16. The government is making progress in accelerating economic growth, with more and more reforms announced. Concrete reforms unveiled by this government so far include speeding up decision making, reducing regulation and red tape to make India more attractive to foreign investors and deregulating the price of diesel. While these changes are likely to have a significant impact on growth, there are still many persistent obstacles to higher growth, including labour market rigidities and infrastructure bottlenecks.

The agency has factored this macroeconomic outlook into its analysis and its base-case default-rate assumptions. The default rate, recovery rate and time to recovery, together with the portfolio's weighted-average yield, were stressed in Fitch's Asia-Pacific 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 transaction, since both the assets and the PTCs are fixed-rate and are denominated in rupees.

The transaction comprises a seasoned portfolio with a moderate loan-to-value ratio. The collateral pool was assigned to the trust at par, and as of 30 November 2014 it had an aggregate outstanding principal balance of INR3.0bn and consisted of 7,799 loans to 7,073 obligors. The collateral pool had a weighted average (WA) original loan-to-value ratio of 80.0%, a WA seasoning of 9.6 months and a WA yield of 15.19%. Loans in the securitised pool were mostly current, with 3.26% of the pool classified as 0-30 days past due and 2.06% of the pool classified as 31-60 days past due.

The pool was diversified, with the largest obligor by outstanding loan representing 0.2% of the total pool. The pool also featured some degree of diversification by asset type, with tractor loans accounting for 7.6% of the pool. The rest were "Prime" commercial-vehicle loans, representing 92.4% of the pool. "Prime" loans focus on customers with favourable payment records of buying cars aged less than five years. Within the commercial-vehicle category, loans secured by heavy commercial vehicles (HCV) accounted for 22.5% of the total portfolio, light commercial vehicles (LCV) accounted for 50.8%, multi-utility vehicles (MUV) accounted for 9.1%, and mini-light commercial vehicles (mini-LCV) accounted for 10.0%.

RATING SENSITIVITIES

Based on Fitch's sensitivity analysis, Fitch may consider downgrading the rating to 'BB+sf' if the base-case default rate increases by 30% or if the base-case recovery rate declines by 30%. The sensitivity analysis assumes that the CE and other factors remain constant, and is based on the transaction's current CE of 13.49% of outstanding portfolio balance, which has increased in percentage terms since closing due to portfolio amortisation.

The rating may be upgraded if the ratings of the credit collateral bank holding the FLCF deposit and the guarantee bank providing the SLCF are upgraded to above 'BBB-' and the portfolio performance remains sound, with adequate CE that can withstand stress at above a 'BBB-sf' rating scenario.