ICICI Bank`s securitised paper downgraded

This is the second instance of downgrade for ICICI Bank in a span of 30 days. Last month, the private sector bank's securitised car and personal loan pool worth over Rs 203 crore was revised downward from "AAA (so)" to "AA (so)" due to rising defaults on payments by borrowers.

Commenting on the downgrade, CRISIL said the performance of the pool has been marked by a higher-than-expected use of cash collateral. The cash collateral is an arrangement (cushion) for making payments to those who have invested in securitised paper when the collections for borrowers show a decline.

 

The collections in the 27 months following securitisation have been lower than expected.

Consequently, the credit cover available to the rated contribution series has seen a decline.

The revised credit opinions indicate a moderate degree of certainty regarding timely payment of financial obligations on the instruments. The securitised paper is backed by commercial vehicle loan receivables originated and serviced by ICICI Bank.

This pool was securitised in December 2005 and 27 months after securitisation, the pool amortised by about 78 per cent. The credit collateral stipulated at the time of rating was Rs 6.8 crore, of which around 79 per cent has been utilised. This level of utilisation is much higher than the rating agency's expectations.

The delinquencies, including repossession losses in the loan pool, are also high at 8.6 per cent for 90-plus days.