Chennai based Equitas Microfinance has securitised loans worth over Rs 100 crore with a select group of financial institutions which included UTI Mutual Fund and HDFC Bank.I FMR Capital was the sole arranger for the deal and has also co-invested in the transaction.The securitisation was backed by 105,422 microloans originated by Chennai based Microfinance compay – Equitas Micro Finance.
Gamma Pioneer IFMR Capital 2010, the Special Purpose Vehicle created for the transaction, has issued three tranches of securities rated by Crisil, India’s foremost rating agency: a 53% senior tranche rated P1+ (so) that was subscribed to by UTI Mutual Fund, 32% senior tranche rated AA (so) that was subscribed to by HDFC Bank and Reliance Capital and a 15% junior tranche rated BBB (so) that was subscribed to by Reliance Capital and IFMR Capital.
The P1+(so) tranche has an expected maturity of 10 months, the AA(so) tranche an expected maturity of 15 months and the BBB(so) an expected maturity of 20 months.
“At Rs. 1.06 billion, this is the largest microfinance securitisation in the sector till date. The size, performance of microfinance securitisations in the capital markets and wide investor base all contributed to a successful placement at about half the credit spread (over the P1+ commercial paper benchmarks) as compared to the previous deal. Microfinance receivables are increasingly being treated on par with other asset classes” says Sucharita Mukherjee, the CEO of IFMR Capital. “This transaction also affirms that capital markets access for high quality microfinance institutions with sound systems and origination processes is indeed robust” she added.
In this deal, Equitas Microfinance is required to provide cash collateral of 9.4 per cent of the pool principal, while the structurer, IFMR Capital, has invested in the subordinated junior tranche. The cash collateral and the subordination of payments to junior tranche in the waterfall mechanism ensures that the senior investor is protected against losses up to Rs. 24.16 crore.
Source – IFMR Blog