(The following statement was released by the rating agency)
March 20 - Fitch Ratings has assigned MMFSL DA March 2012 - an ABS transaction - an expected rating as follows:
INR2,598.9m purchaser payouts: ‘Fitch AA+(SO)(ind)(exp)'; Outlook Stable
The new tractor loan pool to be assigned to the purchaser is originated by Mahindra & Mahindra Financial Services Limited (MMFSL, the “originator” or “seller”, ‘Fitch AA+(ind)'/Stable).
The expected rating addresses the timely payment of interest and principal to the purchaser by the scheduled maturity date of January 2017, in accordance with the transaction documentation. The rating is based on the origination, servicing, collection and recovery expertise of MMFSL, the legal and financial structure of the transaction and the credit enhancement provided.
The loans to be assigned to the purchaser at par have an aggregate outstanding principal balance of INR2,598.9m, as of the cut-off date of 31 March 2012. In this transaction, the credit enhancement for the pool is in the form of an irrevocable and unconditional corporate undertaking provided by the originator, which is equal to 11.10% of initial principal outstanding as of the cut off date. The credit enhancement is available to cover both credit risk and liquidity risk in the transaction.
As part of its analysis, Fitch built a pool cash flow model based on the financial structure of the transaction. The agency also analysed historical data to determine the base values of key variables that would influence the level of expected losses in this transaction. The base values of the default rate, recovery rate, time to recovery, collection efficiency, prepayment rate and pool yield were stressed to assess whether the level of credit enhancement was sufficient for the current rating level.
The final rating is contingent upon the receipt of final documents conforming to information already received.
A presale report for this transaction will be available shortly on Fitch’s websites, www.fitchratings.com and www.fitchindia.com.