RAM Ratings reaffirms AAA rating of Proton Commerce-sponsored Notes Series 2007-A, with stable outlook

Published on 06 December 2012

RAM Ratings has reaffirmed the AAA rating of Class Auto Receivables Berhad’s (“CAR Berhad”) RM11 million Class C Notes Series 2007-A (“Class C Notes”), with a stable outlook. CAR Berhad is a single-purpose entity incorporated to undertake a RM10 billion 20-year Medium-Term Notes (“MTN”) Programme involving the securitisation of hire-purchase (“HP”) loans originated by Proton Commerce Sdn Bhd (“PCSB”), in conjunction with CIMB Bank Berhad (“CIMB Bank”). The RM505 million Notes Series 2007-A is backed by a portfolio of HP receivables (“HP Receivables Series 2007-A”), and represents the first issuance under the MTN Programme.

PCSB had been formed as a joint venture between Proton Edar Sdn Bhd – the marketing arm and 100%-owned subsidiary of Malaysia’s national car company, Proton Holdings Berhad (“Proton”) - and CIMB Bank, the country’s second-largest commercial bank. This is in line with Proton’s aim of developing an auto-financing business by leveraging on CIMB Bank’s established risk-management and credit-underwriting processes.

The reaffirmation of the rating reflects very strong asset coverage in the form of an overcollateralisation (“OC”) level of 783% for the Class C Notes as at end-September 2012. This is attributable to the faster-than-expected deleveraging of the transaction and the robust performance of HP Receivables Series 2007-A. This level of asset coverage provides ample buffer against potential credit losses arising from deterioration in credit quality, defaults and prepayments on HP Receivables Series 2007-A. The well-seasoned portfolio (with a weighted-average age of 83 months as at end-September 2012) recorded a lower-than-assumed actual cumulative net default rate of 1.68% against our base case assumption of 3.84% as at the same date. Its cumulative prepayment rate of 17.90% remained within our expectations. The results of our cashflow analysis, based on the characteristics of the outstanding collateral, indicate strong credit protection for the Class C Notes, which commensurate with the ratings.

The securitised portfolio’s robust performance, coupled with the pass-through mechanism, had led to the early full redemption of the Class A and Class B Notes, 3 years ahead of their maturity. As at end-September 2012, RM11 million of Class C Notes, which will mature on 14 September 2015, remained outstanding. Based on past cash collections and the expected net cash inflow from the underlying portfolio, we envisage the transaction to have sufficient cash for early redemption of the Class C Notes on the next coupon-payment date, i.e. 14 December 2012.

Media contact

Lee Sook Wei

(603) 7628 1017

sookwei@ram.com.my