India's ICICI Bank recently launched a novel auto loan deal sized at Rs8.35 billion (US$182 million). "This deal has been groundbreaking for India, primarily because it adopts a new structure that addresses investor concerns relating to uncertainty of cash flows in ABS because of prepayment risk," said Prashant Purker, head of syndication and structured finance at ICICI Bank. ICICI Bank acted as the originator and arranger for the privately placed issue.

He added that the payouts in the A1 and A2 notes in the transaction have an equated monthly payment (EMI) structure, whereby the investors receive uniform "payouts" per month. Furthermore, an additional prepayment note, Series P, has been introduced to absorb the prepayments in the auto loan pool, thus reducing cash-flow uncertainty for Series A1, A2 and A3.

According to ICICI Bank, the sizing of the Series P is sufficient to absorb prepayment rates in excess of the historical rates in this asset class.

The current issue is comprised of four classes of senior notes and one subordinate note. The series A1 totaled Rs2.665 billion (US$58 million); the series A2 Rs2.478 billion (US$54 million); the series A3, Rs1.112 billion (US$24 million); and the Series P Rs1.981 billion (US$43 million). The subordinate note totaled Rs111 million (US$2.4 million).

"The introduction of this structure helps to create more standardization, with a consequent better ease of understanding from the investor base," Purker said. "The other area which is expected to be improved by this structure is the trading of these types of instruments."

The lead managers on the transaction also pointed to the benefits for the issuer, which was able to lock in significant funds at attractive pricing.

"We managed to place an ABS transaction, which was four to six times larger than the usual deal size, while at the same time obtaining better pricing," Purker said. The success of the deal, according to the leads, was underlined by the diverse investment base, which includes a good number of mutual funds and private sector banks.

According to ICICI Bank, the securitization market so far this year in India has been comprised of 11 issuers with a total issuance figure of Rs36.4 billion (US$795 million) Prior to this deal, the largest issuance was Rs3.8 billion (US$83 million) in 2000.

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