Cagamas SME fully redeems RM150 million Credit-Linked Notes

Published on 10 October 2012

RAM Ratings has received confirmation that Cagamas SME Berhad (“Cagamas SME”) fully redeemed its RM150 million Credit-Linked Notes (“CLN”) upon maturity on 9 October 2012. This transaction is the first rated synthetic securitisation transaction in Malaysia, and the first one involving loans to small and medium-sized enterprises (“SMEs”). Following the redemption, RAM Ratings has withdrawn the rating of the RM150 million CLN and no longer has any rating obligation on the debt facility.

Cagamas SME is a limited-purpose entity that had been specifically incorporated for the purpose of this transaction, and for future transactions of a similar nature. Under the transaction, the Originator, Malayan Banking Berhad (“Maybank”), had partially transferred its credit risks in a portfolio of up to RM600 million of term loans to SMEs - known as “the Reference Pool” - to 3 parties: the Guarantor, Credit Guarantee Corporation Malaysia Berhad; the Issuer, Cagamas SME; and the Senior Swap Counterparty, Cagamas Berhad. Before any claim can be made on these counterparties, the Threshold Amount of RM30 million (acting as the first-loss piece) retained by Maybank would need to be fully exhausted. Maybank is allowed to submit claims equivalent to the outstanding principal of the loans upon the occurrence of a payment default or the bankruptcy of the loan obligor.

As at end-June 2012, the Reference Pool contained 1,087 loans, with a total outstanding principal of RM579.41 million. Since issuance, the Reference Pool had experienced RM55.71 million of cumulative defaults (or 9.3% of cumulative defaults against the initial principal balance of the Reference Pool); of these, only 54.64% (or RM30.44 million) of claims had been submitted. Of the total claims submitted, RM13.64 million of net realised losses had been incurred as at the same date (after including RM4.87 million of reinstatements and recoveries), thereby reducing the Threshold Amount to RM16.36 million.

Media contact

Lim Chern Yit

(603) 7628 1035

chernyit@ram.com.my