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Fitch Assigns Expected Ratings to Sansar Trust Jun 2017
June 23, 2017 / 9:11 AM / 3 months ago

Fitch Assigns Expected Ratings to Sansar Trust Jun 2017

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Sansar Trust Jun 2017 - Rating Action Commentary Appendix here HONG KONG/BEIJING, June 23 (Fitch) Fitch Ratings has assigned expected ratings to pass-through certificates (PTCs) from Sansar Trust Jun 2017. The issuance consists of notes backed by commercial-vehicle loans originated by Shriram Transport Finance Company Limited (STFCL), which also acts as the servicer for the transaction. The ratings are as follows: Sansar Trust Jun 2017 INR6.5 billion Series A PTCs due January 2022: 'BBB-(EXP)sf'; Outlook Stable The rating addresses timely payment of interest and principal in accordance with the payout schedules in the transaction documents. The scheduled payouts will be net of tax deducted at source on the income distributed by the trust to the PTC holders. The final rating is contingent upon the receipt of final documents conforming to information already received. STFCL will assign commercial-vehicle loans at closing to the issuer, which in turn will issue the PTCs. PTC proceeds will be used to fund the purchase of the underlying loans. KEY RATING DRIVERS The rating and Outlook reflect adequate external credit enhancement (CE) of 10.0% of the initial principal balance 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 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). Fitch expects the FLCF to be in the form of fixed deposits with a bank rated at least 'BBB-' and 'F3' by Fitch 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 a fixed deposit with a bank rated at least 'BBB-' and 'F3' by Fitch, with a lien marked in favour of the trustee, 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 CE is deemed sufficient to cover the commingling risks of the servicer and the liquidity required for the timely payment of the PTCs. 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 transaction, since both the assets and PTCs are fixed-rate and denominated in rupees. The transaction comprises a seasoned portfolio, with loans from 21 Indian states. The collateral pool will be assigned to the trust at par; and as of the 20 June 2017 cut-off date, it had an aggregate scheduled outstanding principal balance of INR6.5 billion and consisted of 12,724 loans to 12,069 obligors. The maximum obligor concentration is 0.26%. Fitch deems the characteristics of this portfolio to be compatible with the Global Consumer ABS Rating Criteria given that 94.6% of the loans are provided to individuals. The CE provided in the transaction adequately covers the loss from obligors, accounting for more than 0.05% of the current principal outstanding. The collateral pool has a WA original loan/value ratio of 70.9%, a WA seasoning of 10.5 months and a WA yield of 14.6%. 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. EXPECTED RATING SENSITIVITIES Based on Fitch's sensitivity analysis, the agency may consider downgrading the transaction's rating to 'BB(EXP)sf' if the base-case default rate increases by 30% or to 'BB+(EXP)sf" if the base-case recovery rate declines by 30%. The PTC rating may be downgraded to 'BB-(EXP)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 rating may be upgraded if the ratings of the credit collateral banks 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. 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) disclosed in the offering document that 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. DATA ADEQUACY Fitch reviewed the results of a third-party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis. Fitch reviewed 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 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 final pool data provided by STFCL as at June 2017. - Transaction documentation provided by STFCL as at June 2017. - Over 10 years of static quarterly net default loan data by STFCL up to end-2016. - Over 10 years of dynamic quarterly net default loan data by STFCL up to end-2016. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. Contacts: Primary Analyst Arvind Rana Associate Director +852 2263 9957 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central Hong Kong Secondary Analyst Pauline Si Associate Director +86 10 8517 2129 Committee Chairperson Ben McCarthy Managing Director +612 8256 0388 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Criteria for Country Risk in Global Structured Finance and Covered Bonds (pub. 26 Sep 2016) here Global Consumer ABS Rating Criteria (pub. 25 May 2017) here Global Structured Finance Rating Criteria (pub. 03 May 2017) here Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 23 May 2017) here Related Research Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. 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