Mumbai, January 10, 2020: CredAvenue, Vivriti’s online enterprise debt platform facilitated closure of a first of its kind time-tranched securitisation structure for Muthoot Capital Services Limited (MCSL). 85% of the investment amount was assigned an AAA provisional rating by CRISIL and was subscribed to by a large India based Family Office.
This structure involves splitting the usual single tranche investment into multiple tranches that are allocated principal cash flows (i.e. due for redemption) in a sequential manner. By doing the same, some of the earlier tranches can be rated much higher than the single tranche structure with the same level of credit enhancement. This reduces the risk weight/ capital requirement for the investor and also diminishes the mark-to-market risk associated with the investment. These benefits can then be partly passed by the investor to the originator in terms of better price, resulting in substantial cost savings for the originator.
Commenting on the deal, Mr Vinod Panicker, CFO, Muthoot Capital Services Limited said, “The AAA Provisional rating and the subscription by a new class of Investor is a big validation of the confidence reposed by lenders on the robustness of the MCSL business model. We are glad to be part of this landmark; innovative transaction which we are sure will pave the way for more such deals in the future. The deal execution experience on the Vivriti’s CredAvenue and the support of the team has been commendable.”
Commenting on the deal, Vibhor Mittal, Chief Products Officer of Vivriti Capital said, “At Vivriti Capital, we are committed to design and implement innovative structured solutions that are both cost and capital efficient for all our stakeholders. A time tranched structure (TTS) is one such offering. Depending on various factors like type of asset class being securitised, duration and target rating of the instrument, cost of funds for the investor etc., TTS can result in 30-60 bps reduction in all-in-cost for the Originator and 5-10% bump up in RoE for the investor.”
Corporate Comm India (CCI Newswire)
