IDLC Securitization Trust 2007-A - Credit Rating Agency of ...

CRAB RatingsSECURITIZATIONIDLC SECURITIZATION TRUST 2007-A* Preliminary RatingsBDT 250.00 million Class-A Senior Tranche ……… AAABDT 25.00 million Class-B Subordinate Tranche ...…… AA 1Date of Rating: 21 March 2007Validity:6 month* The preliminary rating is based on information provided by IDLC as of 13 March 2007. Thefinal rating is contingent on final documents conforming to information already received as wellas satisfactory legal opinions.Analyst: Mohammed Tajul IslamTRANSACTION HIGHLIGHTS:Issue Size:BDT 275.00 millionPlanned Issue Date: 1 May 2007Planned Termination Date: 1 May 2011Class- A (Senior Bonds) - BDT 250.00 millionClass-B (Subordinate Bonds) – BDT 25.00 millionThe proposed investors will be subscribed to thesenior bonds (Class-A), where as IDLC willsubscribe to the subordinate bonds (Class-B) inthe form of credit enhancementStructure Type:Denomination:Securitized Bonds (Bonds)BDT 5.00 million each; Total 55 bonds of BDT5.00 million each, amounting to BDT 275.00million.Coupon Rate: Coupon rate for both types of bonds is 12.50%p.aIssuer: IDLC Securitization Trust 2007-AInvestors/Buyers:Reference Obligations:Trustee (Proposed):Auditor:Legal Counsel:Banks/ Financial Institutions/MutualFunds/Insurance Companies/ CorporationsSelected pool of IDLC’s Lease PortfolioInvestment Corporation of Bangladesh (ICB)A. Quasem & Co.Lee, Khan and PartnersPage | 1

CRAB RatingsSECURITIZATIONOriginator & Servicer:IDLC of Bangladesh Limited2.0 TRANSACTION SUMMARY:The Preliminary ratings as indicated above constitute the securitization of leasereceivables originated by IDLC, a leading non-bank financial institution. The creditlinked securities are backed by the collateral (IDLC’s earmarked portfolio) which willbe purchased at closing by IDLC Securitization Trust 2007-A, with the proceeds fromthe issuance of the above mentioned securities. The Issuer is a Special PurposeVehicle (SPV), registered in Bangladesh as Trust. The outstanding principal of theunderlying pool, repayable in quarterly installments after 12 months of issuance ofsecurity and matures at the end of 48 month, whereas the final maturity of theunderlying pool is 58 months from the issue date. The investors hold an undividedbeneficial interest in the underlying assets and receivables. The rating of thesecurities is directly linked to the rating of the underlying pool as well as transactionstructure.3.0 RATIONALE:The preliminary ratings assigned against each class issued by IDLC SecuritizationTrust 2007-A is based on the following:• The credit quality of the reference portfolio of IDLC, whose credit performancehas a direct impact on the repayment of principal and interest to thebondholders.• Credit enhancement in the form of over-collateralization of BDT 29.00 million (initial bond size is BDT 275.00 million whereas total assignment of collateral atthe beginning of the transaction is BDT 304.00 million which constitutes overcollateralizationof 10.54% of the initial pool size).• Cash Reserve in the trust account at the beginning of the transaction to thetune of BDT 6.18 million.• Retention provision of excess spread as credit enhancement.• Reinvestment provisions of trust assets by the trust.• Senior-Subordinated Structure protects the interest of senior bondholders andis a form of credit enhancement to the senior bondholders.• Substitution/Replacement eligibility criteria to swap delinquent andprepayment loans.• The ability of IDLC to underwrite and service its lease finance loans.• Strong payment structure of the transaction.• Undertaking by the servicer to provide servicer advance in case of delay incollection to redeem the bonds at stipulated time.• The undertaking of Investment Corporation of Bangladesh (ICB) as a Trusteeto pay all the expenses of the Trust other than interest on the securities andthe incorporation of appropriated cash collateralization/ substitution triggers.• The bankruptcy remoteness of the Issuer.• Trapping of prepayment risk through creating Provisional Account from wherepre determined obligation of the Trust will be met.Page | 2