VE Trust 8 PTCs backed by M&M Finance get top CRISIL ratings

Our Banking Bureau
18 February 2005

Senior PTCs Series A (Payouts of Rs988.6 million)

AAA(so)

Senior PTCs Series P (Payouts of Rs290.9 million)

AAA(so)

Senior Series Pass Through Certificates (PTCs) issued by VE Trust 8 (with UTI Bank Limited as the trustee) have received CRISIL's provisional rating of 'AAA(so)' (Triple A structured obligation). The rating will become valid 90 days after the required documentation is submitted to CRISIL. The 'AAA(so)' rating indicates the highest degree of certainty regarding timely payment of financial obligations on the instruments. These PTCs are backed by receivables from utility vehicle and car loan contracts originated by Mahindra and Mahindra Financial Services Ltd (Mahindra Finance).

This is the first instance where put options have been offered to a set of PTC holders by an independent third party, in a retail asset securitisation transaction. The Series A PTCs have a series of six-monthly put options provided by IDBI, which enhances their liquidity and marketability. They also have a floating rate of interest linked to NSE MIBOR. A 'prepayment absorbing' fixed rate PTC, Series P, has been designed to absorb the prepayments in the pool. The structure envisages an embedded interest rate swap for converting fixed rate cash flows into floating rate cash flows. The floating rate and fixed rate PTCs are pari-passu, and together comprise the Senior PTCs. Series A PTC holders derive the triple benefits of prepayment protection, a floating rate of interest and high levels of liquidity.