ICRA assigns highest-credit-quality ratings to ICIC's Rs 881cr PTCs

New Delhi, Oct 5 (UNI) ICRA today assigned conditional Highest credit quality ratings to the Pass Through Certificates (PTCs) under the securitisation issue of Rs 881.3 crore backed by new car and two wheeler loan receivables originated by ICICI Bank.

The issue consists of five Series of rated PTCs, four of which are 'principal' strips and one is an 'interest only' (IO) strip.

The conditional ratings are based on the strength of cash flow from the selected pool of contracts, the credit enhancement in the form of credit collateral of 6.40 per cent of initial pool principal and subordination of residual cashflow in the structure as well as opening overdue, liquidity enhancement available in the form of corporate undertaking of 4.61 per cent of initial pool principal and the integrity of the legal structure.

The selected pool is composed of receivables on loans given for financing new cars (36 per cent) and two wheelers (64 per cent).

The new car loans in the pool have low seasoning (average 4.78 months) and moderate LTV-based profile.

In the case of two wheeler loans, the seasoning is moderate (average 4.39 months). The average LTV of the two wheeler loan contracts in the pool is around 73.2 per cent which is in line with the level observed in this asset class.

The conditional ratings are subject to the fulfillment of all conditions under the structure, review of documentation pertaining to the transaction by ICRA and ICICI Bank furnishing to ICRA an independent legal opinion on the transaction from the transaction legal counsel.

As per the transaction structure, the loan pool will be transferred 'at par' to an SPV. The Trustee will thus issue five Series of PTCs, four being principal strips and the fifth being interest only strip.

Support for meeting the investor payouts is envisaged through two distinct sources, liquidity support is available through a liquidity facility (in the form of corporate undertaking from IBL) for making payment of scheduled receivables to PTCs in respect of contracts in softer delinquency buckets (defined as up to 90 days).

Credit enhancement for the Senior PTCs is through subordination of excess pool cashflow, after meeting payouts to senior PTCs, subordination of collections from opening overdues and credit collateral (in the form of cash transferred to the Trustee or corporate undertaking), to be used for meeting shortfall not covered by liquidity facility.

Investor payouts pertaining to a month's billing on the pool contracts will be made in the same month. Since the investor payouts are scheduled to be made prior to the completion of the month to which they relate to, the liquidity facility will be used for making such advance payouts.

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