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CARE Ratings upgrades select PTCs backed by loan originated by Piramal Capital and Housing Finance

With resolution of the bankruptcy process, the access to cash collateral has been restored to meet potential future shortfall, CARE said.

November 16, 2021 / 07:49 PM IST
The rating revision takes into account the successful completion of corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016.

The rating revision takes into account the successful completion of corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016.

Rating agency CARE Ratings on November 16 said that it has upgraded select pass-through certificates (PTCs) backed by loan originated by Piramal Capital and Housing Finance Ltd (erstwhile DHFL) to AAA(SO).

A PTC is a certificate that is given to an investor against certain mortgaged-backed securities that lie with the issuer.

On September 29, Piramal Enterprises had announced that it acquired DHFL by paying the latter's creditors Rs 38,000 crore.

The rating revision takes into account the successful completion of corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016, the rating agency said in a press release.

The National Company Law Tribunal (NCLT) on June 7 sanctioned and approved the resolution plan submitted by PCHFL.

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"In view of the above, since CIRP is concluded and Resolution Plan is already approved and implemented, PCHFL has communicated to the trustee that the Credit Enhancement has been reinstated and will be normalising the utilisation of Cash Collateral with regard to securitisation transactions originated by PCHFL (erstwhile DHFL)," CARE said.

Post default by DHFL on its debt obligation and subsequent bankruptcy proceeding under Insolvency and Bankruptcy Code (IBC), the collections from securitised assets continued to be available to PTC investors for servicing (except for intermittent disruption initially).

However, access to the cash collateral was not available to meet any shortfalls in PTC payouts, CARE said.

For over a year, the collections from securitised pools have been sufficient to make PTC payouts and there were no delays in the payouts to the investors.  However, the credit ratings of PTCs were constrained due to lack of access to cash collateral (credit enhancement).

With resolution of the bankruptcy process, the access to cash collateral has been restored to meet potential future shortfall, CARE said.

"Considering this significant development, stable pool performance and track record of servicer, CARE Ratings has upgraded rating of below-listed PTCs to ‘CARE AAA(SO)’. The investors have not lost any money in any of the CARE Ratings-rated retail asset pool," the agency said.

Additionally, revision in the ratings/credit opinion takes into account the performance of the said transactions from the inception and the timely servicing of the PTCs during the same period. The performance of the all the transactions has been satisfactory, CARE said.
Moneycontrol News
first published: Nov 16, 2021 07:49 pm

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