India: IFMR and Equitas Complete Rated Securitisation of Micro Loans

Mar 2009
Mumbai, India, March, 09 2009 - IFMR Capital, a non-banking finance company based in Chennai and Equitas Micro Finance India have completed the first rated micro loan pool backed securitisation with a principal amount of pass-through certificates (PTCs) amounting to Rs. 157 million (USD 3 ml).

The underlying loan portfolio comprises priority sector urban micro loans originated by Equitas with final maturity in October 2010.

CRISIL has rated the Series A1 and Series A2 pass through certificates, AA(so) and BBB(so), respectively. The PTCs will be issued by a special purpose vehicle, IFMR Trust Pioneer I ( SPV), set up specifically for the purpose of this securitisation. The securities are backed by microfinance loan receivables originated by Equitas. IFMR Capital, the sole structurer and arranger, provides mezzanine financing in the form of an investment in 100 per cent of the BBB(so) rated Series A2 securities, while, the AA(so) rated securities have been fully underwritten by a bank investor.

Capital Structure of Securitisation

Capital structure of securitisation

For credit enhancement, Equitas provided a first loss facility in the form of cash collateral equal to 11.7 per cent of the principal amount of the portfolio. This cash collateral together with the excess interest spread being trapped in the SPV are used to cover any shortfall in repayments on the AA(so) and BBB (so) securities. The investors in the AA (so) rated Series A1 PTCs are further protected by the junior BBB (so) rated Series A2 PTCs, which comprise 20 per cent of the issue size.


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