CRISIL assigns provisional ratings to Series A1 and Series A2 PTCs issued by
Sanada CV IFMR Capital 2016
Trust
Details
Structure
Yield Terms
Rated amount
(Rs. Million)
Pool Principal
(Rs. Million)
Tenure
(months)#
Cash collateral
(Rs. Million)
Ratings&
Sanada CV IFMR Capital 2016
Series A1 PTCs
Par with EIS
Fixed
997.0
1,113.9
41
73.6*
Provisional CRISIL A- (SO)@
Series A2 PTCs
Fixed
44.6
41
73.6^
Provisional CRISIL BB+(SO)@
#Indicates door-to-door tenure between issuance date and legal final maturity date. Actual tenure will depend on level of prepayment in pool, exercise of clean-up call option, and extent of shortfall.
&Series A1 PTC holders are entitled to receive timely interest on a monthly basis, while the principal payment is promised on an ultimate basis. Series A2 PTC holders are entitled to receive timely interest on a monthly basis once Series A1 PTC holders are paid out in full. The principal payment to Series A2 PTC holders is promised on an ultimate basis.
*Additional credit support includes Rs 235.1 million of scheduled cash flow subordination (assuming zero prepayments) – Includes overcollateralization of Rs 117.0 million
^Additional credit support includes Rs 181.7 million of scheduled cash flow subordination (assuming zero prepayments) – Includes overcollateralization of Rs 72.4 million
@A prefix of 'Provisional' indicates that the rating centrally factors in the strength of specific structures, and will be supported by certain critical documentation by the issuer, without which the rating would either have been different or not assigned ab initio. This is in compliance with a May 6, 2015, Securities and Exchange Board of India (SEBI) directive, “Standardising the term, rating symbol, and manner of disclosure with regard to conditional/ provisional/ in-principle ratings assigned by CRAs”.
CRISIL has assigned its ‘Provisional CRISIL A- (SO)’ and ‘Provisional CRISIL BB+ (SO)’ ratings to the Series A1 pass-through certificates (PTCs) and Series A2 PTCs, respectively, issued by Sanada CV IFMR Capital 2016, a trust settled by Catalyst Trusteeship Ltd. The PTCs are backed by two-wheeler loan receivables originated by Muthoot Capital Services Ltd (MSCL; ‘CRISIL A/FA/Stable/CRISIL A1’).
The rating is based on the credit quality of the pool cash flow, origination and servicing capabilities of MCSL, credit support available to the PTCs, payment mechanism for the transaction, and soundness of the transaction’s legal structure.
The transaction has a ‘par with monthly subordinated excess interest spread (EIS)’ structure, wherein the trust will issue Series A1 PTCs and Series A2 PTCs in exchange of a purchase consideration equal to 89.5 per cent and 4.0 per cent, respectively, of the pool principal at the time of securitisation. Total credit support available in the transaction is as follows:
• Internal credit support in the form of scheduled cash flow subordination, aggregating Rs 235.1 million and Rs 181.7 million for Series A1 PTCs and Series A2 PTCs, respectively
• External credit-cum-liquidity collateral of Rs 73.6 million (5.7 per cent of pool cash flow), of which 1.7 per cent of pool cash flow is in the form of cash collateral and 4.0 per cent of pool cash flow is unfunded credit enhancement provided by MCSL
Series A1 PTCs are senior in nature, and will have the first priority right on the trust property. These PTCs are entitled to monthly interest. Principal and interest payments for Series A2 PTCs are fully subordinated to payouts for Series A1 PTCs. The transaction envisages ultimate payment structure for principal payouts for both Series A1 and Series A2 PTCs. Upon maturity of Series A1 PTCs, Series A2 PTCs are entitled to monthly interest. Catalyst Trusteeship Ltd. will be appointed as the trustee to monitor the transaction on behalf of the PTC holders. MCSL will continue to service the pool contracts as the servicing agent.
The pool cash flow is securitised and comprises receivables from two-wheeler loans originated by MCSL. The pool has a weighted average net seasoning of 11.9 months, with Kerala and Karnataka accounting for 63.3% and 20.1%, respectively, of the pool principal outstanding. Average ticket size of the pool is Rs 0.5 lakhs. All contracts in the pool are current as on the cut-off date.
This is a ‘provisional’ rating and will be converted into a ‘final’ rating based on receipt of the following documents covering critical aspects related to the transaction, in line with the factors evaluated for assigning the provisional rating.
• Trust deed
• Assignment agreement
• Power of attorney
• Information memorandum
• Legal opinion
• Trustee letter
• Representations and warranties letter
• Accounts agreement
• Servicing agreement
• First loss facility agreement
• KYC and diligence audit report
Additional documents, if any, executed for the transaction or as mandated by CRISIL, should also be provided. A rating rationale/report indicating conversion of the ‘provisional’ rating into ‘final’ post receipt of all required final legal documents will be published on CRISIL’s website. Please click on the link below for detailed information on CRISIL’s policy on provisional rating: Revision in CRISIL policy for assigning ‘provisional’ rating.
Past Rated Pools
This is the first securitisation transaction originated by MCSL that is being rated by CRISIL.
About the Originator
Set up in 1994, MCSL is a deposit-taking, systemically important, non-banking financial company (NBFC). MCSL is an integral part of the Muthoot Pappachan group and started with financing two-wheelers. In the late 1990s, on account of intense competition, the company exited these businesses and shifted to gold loans. Subsequently, as the group scaled up its gold financing business in Muthoot Fincorp Limited, MCSL entered the two-wheeler financing segment once again in 2007-08 and gradually exited the gold loan business. Currently, MCSL offers business loans in addition to two-wheeler loans. MCSL is listed on the Bombay Stock Exchange and the National Stock Exchange and is the only listed company in the group. As on March 31, 2016, its advances portfolio of Rs 10.4 billion comprised two-wheeler loans (86 per cent). Three-wheeler loans and business loans accounted for the rest of the advances.
MCSL had a profit after tax (PAT) of Rs 228.5 million on a total income of Rs 2.3 billion for 2015-16, against a PAT of Rs 222.9 million on a total income of Rs 1.9 billion for 2014-15. In the three months ended June 30, 2016, PAT was Rs 44.8 million on a total income of Rs 642.3 million.
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Last updated: April 2016
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