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Sri Lanka lease-backed security retains rating: Fitch

Sept 26, 2008 (LBO) - A lease-backed security issued by Sri Lanka's People's Leasing Company, using a trust mechanism, has retained its 'A-(lka)' rating which is the same as the originator, Fitch Ratings said.

While credit enhancements were enough to support a higher rating, Fitch says there was an unhedged interest rate risk on the floating rate notes, and there was also no alternative servicer to the notes other than People's Leasing.

This restricted the LBTC rating to that of People's Leasing.
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The absence of minimum quality criteria when replacing assets, lack of a minimum excess collateralisation trigger to trap excess cash and the untested nature of bankruptcy proceedings for the mortgaged leases (as a liquidity facility is not incorporated into the transaction) are further constraining factors of the rating, Fitch said.

"While the transaction documents require the replacement of assets every quarter, only two such replacements have occurred to date," Fitch said.
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"Nevertheless, the agency does not view this as a serious concern given the high level of credit enhancement in the form of excess collateralisation.


"

Monthly collections of current dues averaged 57 percent and over dues

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