OREANDA-NEWS. March 23, 2015. Fitch Ratings has assigned expected ratings to Platinum Trust March 2015 - Tranche I's pass-through certificates (PTC) as follows:

INR2.97bn Series A1 PTCs due November 2019: 'BBB-(EXP)sf'; Outlook Stable

The ratings address 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 final ratings are contingent upon the receipt of final documents conforming to information already received.

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 ratings and outlook reflect adequate external credit enhancement (CE) of 13.40% 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 will comprise a first-loss credit facility (FLCF) and a second-loss credit facility (SLCF). The FLCF is expected to be 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 expected to be in the form of 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 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 transaction comprises a seasoned portfolio with a moderate loan-to-value ratio. The collateral pool will be assigned to the trust at par, and as of 28 February 2015 it had an aggregate outstanding principal balance of INR2.97bn and consisted of 8,478 loans to 8,354 obligors. The collateral pool had a weighted average original loan-to-value ratio of 85.1%, a WA seasoning of 13.4 months and a WA yield of 14.98%. Loans in the securitised pool were mostly current, with 0.93% of the pool classified as 1-30 days past due.

The pool was diversified, with the largest obligor by outstanding loan representing 0.54% of the total pool. The pool also featured some degree of diversification by asset type, with tractor loans accounting for 5.0% of the pool. The rest were 'Prime' and 'Shubh' commercial-vehicle loans, representing 93.5% and 1.5% of the pool respectively. Prime loans focus on customers with favourable payment records of buying commercial vehicles aged less than five years while 'Shubh' loans emphasise customers with limited payment records of buying commercial vehicles aged more than five years. Within the commercial-vehicle category, loans secured by light commercial vehicles (LCV) accounted for 50.4% of the total portfolio, heavy commercial vehicles (HCV) accounted for 24.1%, mini-light commercial vehicles (mini-LCV) accounted for 12.7%, and multi-utility vehicles (MUV) accounted for 7.8%.

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% or to 'BB+sf" if the base-case recovery rate declines by 30%. 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 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.

At closing, CIFCL will assign commercial-vehicle and tractor loans to Platinum Trust March 2015 - Tranche I, which in turn will issue the PTCs. The PTC proceeds will be used to fund the purchase of the underlying loans.