ICRA rating for ICICI CBO Fund

THE INVESTMENT Information and Credit Rating Agency (ICRA) has assigned an LAAA (SO) pronounced L Triple A S O0 rating to the Primary Units issue of ICICI CBO Fund - 1, a close-ended mutual fund scheme having a tenure of 42 months, under ICICI Securities Fund sponsored by ICICI. The fund will be managed by ICICI Investment Management Company (AMC). The rating indicates highest safety and a fundamentally strong position. Risk factors are negligible. There may be circumstances adversely affecting the degree of safety but such circumstances, as may be visualised, are not likely to affect the timely payment of principal and interest to the primary unitholders as per terms.

The rating is based on the credit enhancement mechanism designed to ensure full and timely repayment to the primary unit holders from the cash flows arising out of the selected pool of non convertible debenture (NCD) issues and the integrity of the legal structure.The transaction involves sale of a select pool of NCDs by ICICI to the issuing fund at a pre-determined price. The pool contains NCDs issued by 23 Indian corporates across 16 diverse industry segments. In legal parlance, the transaction envisages a true sale of all rights, title, interest and entire ownership in the receivables arising out of the aforementioned NCDs by ICICI to the fund. Only NCD issues having an up-to-date repayment track record to ICICI have been selected for the purpose.

The underlying cash flows comprising the principal and interest receivables of the selected NCD issues aggregate to Rs. 124.02 crores. Of this Rs. 93.27 crores is scheduled to accrue to the primary unit holders. These receivables shall be passed on to a designated trust and retention account operated under instructions of the trustee (ICICI Trusteeship Services) to the fund. The amounts thus collected in the designated account will be used to meet the repayment obligations of the holders of both the rated primary units and the un-rated secondary units issued by the scheme. The units are proposed to be listed on the National Stock Exchange.

ABN Amro Bank NV will act as the custodian for the issue. ICICI has agreed to underwrite the entire investment in the un-rated secondary units issued by the scheme at the onset of the transaction. On each payout date (the tenth day of the month following the end of a quarter), the available funds will be appropriated to meet the pre-defined scheme expenses first (aggregating to Rs. 73 lakhs over the currency of the issue), followed by the repayment obligations to the primary unitholders and ultimately that of the secondary unit holders. Credit enhancement for the primary unitholders has been achieved by appropriately determining the level of cash flows scheduled to accrue to the primary and secondary unitholders and subordination of the rights and interest of the secondary unitholders to that of the primary unitholders of the scheme.

The trust and retention mechanism will involve a buffer support arrangement of Rs. 2 crores, carved out of the collections made during the first quarter ending on September 30, 2000. This will help mitigate temporary shortfall risks in meeting the repayment obligations to the primary unitholders and thereby help in ensuring full and timely payment commitments. There will be no further recourse to ICICI or the issuing fund for meeting the repayment obligations.

Corporate Bureau