UTI Bank securitises Rs 376 cr loan obligation

UTI Bank has concluded the largest-ever collateral loan obligation of around Rs 376 crore.

The pool of assets was securitised in two tranches "" series I and II. Series I consists of 15 corporate loans with a total receivables of Rs 179 crore and series II consists of 11 corporate loans with a total cash flow of Rs 197 crore.

Standard Chartered Bank and Rabo Bank were the lead arrangers to the issue. IL&FS Trust Company Ltd has acted as a trust to manage the issue.

The average maturity profile of series I is around four months at the short class with a coupon of 5.8 per cent while 10 months on the longer end with a coupon of 6.70 per cent.

The average tenure for series II is six months with a coupon of six per cent, while 19 months on the longer end at 6.75 per cent.

Collateral loan obligations help banks to proactively manage their portfolio, create liquidity which can be used to book new business and also earn an interest rate arbitrage, said UTI Bank vice-president, credit, Sudhir Dash.

In addition to the current tranche, the bank plans to securitise corporate loans worth Rs 400 crore in this fiscal, he added. The major subscribers to the issue were mutual funds, banks and institutions, said Dash. The portfolio has a maximum concentration of industrial/manufacturing and has some exposure to chemicals.

Through collateralised loan obligations commercial banks securitise high quality, high yielding commercial and industrial loans to gain regulatory capital relief and manage their credit exposure.