RAM Ratings has reaffirmed the respective A2/Stable/-, A3/Stable/- and BBB2/Stable/- ratings of Domayne Asset 2 Corporation Berhad’s (DACB 2) Class A, Class B and Class C Notes (collectively known as “the Senior Notes”).

Published on 28 October 2013

RAM Ratings has reaffirmed the respective A2/Stable/-, A3/Stable/- and BBB2/Stable/- ratings of Domayne Asset 2 Corporation Berhad’s (DACB 2) Class A, Class B and Class C Notes (collectively known as “the Senior Notes”). DACB 2 is a special-purpose vehicle that had been incorporated to undertake the issuance of the Senior Notes, to partially fund the purchase of Eligible Receivables from Diners Club (Malaysia) Sdn Bhd (Diners Malaysia or the Originator).
We have reaffirmed the ratings on the assumption that the revisions which DACB 2 had proposed for the transaction, including the issuance of additional loss-absorbing Junior Notes, will be successfully executed. We expect the execution to be completed within the next 3 weeks. These changes are intended to accommodate Diners Malaysia’s new credit-card product in line with the Originator’s business strategy of expanding its receivables base and increasing the utilisation rate of its credit cards. The revisions extend the definition of Eligible Receivables to incorporate the new cash advance product and include the requirement for the cash advance receivables to be purchased at an over-collateralisation (OC) ratio of 690.5%. At this level, the OC required is consistent with RAM’s A2 stress scenario.
As a result of the proposed revisions, additional Junior Notes will be issued to fund the purchase of the cash advance receivables, to support the RM33.5 million of Class A notes that are currently outstanding. RAM highlights that the inclusion of the additional cash advance receivables in the securitised pool will lead to a lower collection rate and excess spread percentage. DACB 2 estimates the 2 ratios will drop from 31% and 1.8% to about 20% and 1.2%-1.3%. However, these levels are still higher than the respective trigger rates of 12% and 1%.
We have reviewed the draft Supplemental Master Definitions Schedule and are satisfied that it is consistent with our expectations. We also understand that the changes have been approved by the Security Trustee, the Facility Agent and the Transaction Administrator.
The transaction’s moderating factors include the Originator’s untested servicing ability in handling a much larger receivables base. Another factor is the possible compromising of the Originator’s credit standards due to competitive pressures. We also note the parent company’s recent announcement of exploring a divestment of its cards business. However, no binding terms and conditions have been agreed to date; we will continue monitoring the development on this front. On the other hand, we note that the Originator’s enhanced operational and monitoring system has not encountered any major interruption in facilitating its credit-card business.

Media contact
Lim Yu Cheng
(603) 7628 1188
yucheng@ram.com.my