MARC AFFIRMS ALL CLASSES OF NOTES ISSUED BY CLASS AUTO RECEIVABLES BERHAD UNDER ITS NOTES SERIES 2007-A

Sep 6, 2011 -
MARC has affirmed its AAA ratings on Class Auto Receivables Berhad’s (Class Auto) RM395.0 million Class A, RM20.0 million Class B and RM20.0 million Class C Notes (collectively known as Notes Series 2007-A). Notes Series 2007-A represents the first series of issuances backed by a RM500.0 million portfolio of hire purchase receivables (Portfolio 2007-A) under Class Auto’s RM10.0 billion Medium Term Notes (MTN) Programme. The rating outlook for the notes has been maintained at stable. The affirmation of the ratings reflects increased credit enhancement levels for the notes, attributable to the collateral pool’s strong performance.

Class Auto is a special purpose vehicle incorporated for the purpose of securitising hire purchase receivables originated by CIMB Bank Berhad (CIMB Bank) on behalf of Proton Commerce Sdn Bhd (PCSB) via the RM10.0 billion nominal value asset-backed MTN programme. PCSB is the beneficial owner and servicer of Portfolio 2007-A pursuant to the joint venture agreement entered into between CIMB Bank and Proton Holdings Berhad’s marketing arm, Proton Edar Sdn Bhd (PESB). PCSB was established with the objective of offering competitive financing products to new Proton car purchasers, leveraging on PESB’s extensive distribution network throughout Malaysia and the infrastructure facilities offered by CIMB Bank.

Portfolio 2007-A at transaction close comprised hire purchase receivables of new Proton cars, with a minimum seasoning of three months and loan-to-value ratios of less or equal to 90%. Monthly collections from Portfolio 2007-A are allocated for the servicing of the coupon and principal payments for the rated notes. Under the transaction, collections from Portfolio 2007-A are held back with the servicer for one day before being remitted to the series collection account. Nonetheless, MARC is of the opinion that the one-day commingling risk is mitigated by CIMB Bank’s strong credit standing (rated AAA/MARC-1/Stable).

As of June 30, 2011 (the reporting date), credit enhancement levels for the outstanding Class A, Class B and Class C notes registered at 304.0%, 229.9% and 184.8% respectively (initial rating: 126.6%; 120.5%; 114.9%) supported by RM188.06 million in hire purchase receivables and a RM6.29 million Collection Account balance. Credit enhancement levels have continued to improve with Portfolio 2007-A’s stable performance and offer more protection against default risk and prepayment risk. On the reporting date, the collateral pool’s outstanding principal balance RM188.06 million showed cumulative default and cumulative prepayment rates of 1.17% and 13.73% respectively. Over the past year, Class Auto has made early redemptions of up to RM89.0 million in Class A notes, leaving RM102.0 million of notes outstanding: Class A - RM62.0 million; Class B - RM20.0 million; and Class C – RM20.0 million.

MARC expects Portfolio 2007-A to continue performing well based on its credit quality, historical behaviour and our assessment of economic conditions. Based on the foregoing analysis, MARC concludes that available credit enhancement will adequately support the AAA ratings for all three classes of notes.

Contacts:
Ruben Khoo Sheng Luen, +603-2082 2265/ rubenkhoo@marc.com.my;
Sandeep Bhattacharya, +603-2082 2247/ sandeep@marc.com.my.