OREANDA-NEWS. Fitch Ratings has assigned a final rating to Sansar Trust Jan 2015's pass-through certificates (PTC) as follows:

INR3.90bn Series A PTCs due July 2019: 'BBB-sf'; Outlook Stable

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 originated by Shriram Transport Finance Company Limited (STFCL), which is also the servicer for the transaction.

KEY RATING DRIVERS

The rating and outlook reflect adequate external credit enhancement (CE) of 17.50% of the initial principal balance, and STFCL'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 Canara Bank (BBB-/Stable/F3) in the name of the originator with a lien marked in favour of the trustee. Initially, the SLCF is in the form of a fixed deposit with Canara Bank, but it may subsequently be replaced by an unconditional and irrevocable guarantee provided by a bank rated at least 'BBB-' and 'F3' by Fitch.

The credit enhancement is deemed sufficient to cover the commingling risks of the servicer and the liquidity required 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 (WA) 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 portfolio has been assigned to the trust at par. 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 31 December 2014 it had an aggregate outstanding principal balance of INR3.90bn and consisted of 11,321 loans to 10,988 obligors. The collateral pool had a weighted average original loan-to-value ratio of 63.8%, a WA seasoning of 10.8 months and a WA yield of 16.47%. Used commercial-vehicle loans accounted for 97.2% of the pool with the rest being new commercial-vehicle loans. Loans in the securitised pool were mostly current, with 6.60% of the pool classified as 1-30 days past due.

The pool was diversified, with the largest obligor by outstanding loan representing 0.05% of the total pool. The pool also features some degree of diversification by asset type, with loans for heavy-commercial vehicles (HCV) representing the most concentrated type at 50.8% of the pool. Light-commercial vehicles (LCV), passenger vehicles, small-commercial vehicles (SCV), and equipment loans account for 26.3%, 8.3%, 7.7%, and 6.8% respectively of the total pool.

RATING SENSITIVITIES

Based on Fitch's sensitivity analysis, Fitch may consider downgrading the rating to 'BBsf' if the base-case default rate increases by 30% from the current rate or to 'BB+sf" if the base-case recovery rate declines by 30% from the current rate. The sensitivity analysis assumes that the CE and other factors remain constant.

The rating may be upgraded if the ratings of the credit collateral bank holding the FLCF and SLCF deposits and the bank providing the guarantee 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.