Jun 18, 2012 -
MARC has affirmed its AAAIS rating on Cagamas MBS Berhad’s
(Cagamas MBS) RM2,110.0 million asset-backed Sukuk Musyarakah issuance (CMBS
2007-1-i) with a stable outlook. The rating action affects outstanding Sukuk of
approximately RM1,525.0 million, following the redemption of the RM255.0
million Tranche 2 Sukuk on May 29, 2012. The affirmed rating reflects a strong
credit enhancement level of 127.5% for outstanding Sukuk observed at
end-October 2011 totaling RM1,780.0 million, supported by a collection account
balance of RM280.3 million and an outstanding collateral pool balance of
RM1,989.81 million in non-defaulted home financings. The collateral pool, which
comprises seasoned home financings of high credit quality, has continued to
show stable performance over the period under review. The affirmed rating also
benefits from satisfactory management of collateral servicing and transaction
administration.
Cagamas MBS is a limited purpose entity and a wholly-owned
subsidiary of Cagamas Holdings Berhad (Cagamas Holdings) whose principal
activities are restricted to securitising Islamic home financing and
conventional housing loans of public sector employees originated by the
Government of Malaysia (GOM). The collateral backing this transaction is
Portfolio 2007-1-i, a pool of eligible Government Staff Islamic Home Financings
(GSIHFs) on which monthly home financing instalments are made via direct
salary/pension deductions. The GOM’s Housing Loans Division, or Bahagian
Pinjaman Perumahan (BPP), is the servicer of Portfolio 2007-1-i.
Based on the servicer’s quarterly report for CMBS 2007-1-i
dated February 28, 2012 (the reporting date), the outstanding principal of the
collateral pool totalled RM2,001.39 million, representing 24,591 fixed-rate
home financings with an average size of RM81,387 and a weighted term to maturity
of 16.53 years. The weighted average seasoning of the collateral pool was 7.6
years. As of the same date, the home financing portfolio’s cumulative default
rate registered at 0.46% versus MARC‘s expected cumulative default rate of
1.83%. The majority of the RM11.59 million in defaults (home financing amounts
in arrears for more than 9 months) under the transactions have been the result
of data reconciliation lags and delays in salary and/or pension deductions due
to changes in the employment status of government staff. Meanwhile, the
collateral pool’s cumulative prepayment rate of 4.42% remained within MARC’s
range of stressed prepayment assumptions.
The transaction’s limited pass-through provision allows the
use of excess cash flow after meeting the scheduled Sukuk repayments on Tranche
1 through 5 to make an early repayment on Tranche 7, followed by Tranche 6
provided that the collection account balance remains in excess of RM90 million
after the early redemption. However, the early redemption condition has not
been triggered as at the review date. MARC’s cash flow analysis has
demonstrated that the Sukuk are able to withstand ‘AAA’ default and prepayment
stress scenarios for their remaining tenure. Notwithstanding, MARC acknowledges
that actual liquidity levels could differ from projections due to differences
between observed and simulated early redemption in relation to timing and
redemption amount. The cash flow analysis also considers increases of 7% to 13%
in civil servant salaries under the government’s improved Malaysian
Remuneration System, effective from April 2012 onwards. MARC views the salary
increases to be a positive factor for the collateral pool’s performance going
forward and expects some increase in prepayment.
MARC’s stable outlook for CMBS 2007-1-i is premised on
stable performance of the transaction’s collateral pool and its high
overcollateralisation ratio, which offers ample protection against default and
prepayment risk.
Contacts:
Ng Chun Kean, +603-2082 2230/ chunkean@marc.com.my
Jason Kok, +603-2082 2258/ jason@marc.com.my
David Lee, +603-2082 2255/ david@marc.com.my
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