Mumbai: Cholamandalam Investment and Finance Company Limited completed a first of its kind securitisation of Rs854 million of its auto loan portfolio late last week. This was announced by Citibank N.A, the arranger in a press communique.

This is the first transaction in India where a yield reserve has been used for taking care of interest rate mismatches. As the underlying receivables from the auto loans carried a fixed interest rate and the PTCs offered floating rate to investors, the structure incorporated a yield reserve sized by the rating agency to cover the basis risk.

Another innovation driven by investor demand was staggered payment of prepayments on the pool to reduce unscheduled payments to investors.

The SPV, called Asset Securitisation Trust December 2004, issued six series of pass through certificates (PTCs) to investors rated AAA(so) by CRISIL. All the six series issued were parri-passu senior PTCs. The senior PTCs are structured to receive semi-annual payments and have a door-to-door maturity of approximately two years with floating rate coupons linked to the local benchmark MIBOR (Mumbai Inter Bank Offer Rate).

The securitisation attracted significant interest from mutual funds. The PTCs were distributed and underwritten by Citicorp Capital Markets Limited while Citibank N.A. was the sole arranger.

S Bhaskar, vice president, Cholamandalam Finance, said, " We have identified securitisation as a key funding source and the response to the current issue is a reflection of the continued confidence of the capital markets in the origination and servicing capabilities of Cholamandalam Finance."

During the year 2004, Citigroup has placed in the Indian markets more than 25 issuances aggregating to around Rs. 4.3 billion. For the year 2004, Citigroup retains its number 1 position in Asian asset securitisation league tables and is placed at no. 2 position in volume and no. 1 position in number of deals in the securitisation league tables in India.