Citigroup completes floating rate securitisation issuance

Mumbai: Citigroup has completed India's first floating rate securitisation issuance. The transaction, which closed in November, involved securitisation of receivables aggregating to Rs 281 crore arising from fixed rate auto loans originated by Citibank and Citicorp Finance India Ltd.

A Citibank official says the issuance, with an embedded derivative, offers a floating coupon to investors linked to Mibor (Mumbai Inter Bank Offer Rate). The issuance was fully subscribed to by seven mutual fund investors.

Apart from the first floating rate offering to investors in securitised debt, the issuance is the use of a fixed rate 'prepayment absorbing' pass-through certificate (PTC). All the floating rate PTCs are, thus, protected from volatility in cash-flows from prepayments in the pool. All the PTCs have been rated AAA(so) by Crisil, based on the selection criteria and credit enhancement.

Says Citigroup country officer Sanjay Nayar: "The Indian securitisation market is now poised to benchmark itself against global structures and practices. The effective combination of derivative and securitisation technology will result in more sophisticated structures going forward and is expected to take securitisation volumes to new highs."

Varun Batra, head, structured finance and syndication, says: "With expectation of domestic interest rates bottoming out, there is an increasing demand from investors for a floating coupon on securitised debt. This path-breaking structure for the local market incorporates a derivative and also protects the floating rate PTCs from prepayments, thereby effectively meeting investor demand."