RAM Ratings has upgraded the rating of Premium Commerce Berhad’s (PCB) RM12 million Class B Notes Series 2012-A (Class B Notes), from AA2 to AAA

Published on 27 December 2013

RAM Ratings has upgraded the rating of Premium Commerce Berhad’s (PCB) RM12 million Class B Notes Series 2012-A (Class B Notes), from AA2 to AAA, while reaffirming the AAA rating of its RM300 million outstanding Class A Notes Series 2012-A (Class A Notes) (collectively known as “the 2012-A Notes”). Both long-term ratings have a stable outlook. This transaction involves the securitisation of the automobile hire-purchase (HP) receivables from TC Capital Resources Sdn Bhd under PCB’s RM2 billion HP Receivables-backed MTN Programme. As at 31 August 2013, RM312 million of the 2012-A Notes remained outstanding.
The rating upgrade for the Class B Notes is premised on the better-than-assumed performance of the securitised pool and the deleveraging of the transaction, which had strengthened its collateral coverage. This coverage, in the form of overcollateralisation (OC), provides sufficient protection against the risk of prepayments and defaults under the “AAA” stressed rating scenario. As at end-August 2013, the respective OC ratios for the Class A and Class B Notes had improved from 9.38% and 5.80% to 12.01% and 7.70%, respectively. The Class A and Class B Notes are backed by RM287.20 million of principal balance on the HP receivables and RM48.83 million of available cash. The cumulative net default rate for the HP receivables under the 2012-A Notes stood at 0.04% as at 31 August 2013, below our base-case cumulative default rate of 0.56%. At the same time, the cumulative prepayment rate stood at 2.91%, close to our low-prepayment assumption of 3.00%.
The ratings are also supported by the transaction’s legal and payment structures. These include a pass-through mechanism, which reduces any potential negative carry arising from low reinvestment returns, and a RM1 million Liquidity Facility Reserve that acts as a buffer to cover shortfalls in senior expenses and coupon payments on the Class A Notes.
The HP receivables in the portfolio are derived from 6,388 HP contracts, with an outstanding principal balance of RM287.20 million as at end-August 2013. These loans had a weighted-average (WA) seasoning of about 21 months and a WA remaining tenure of about 42 months. The WA size of the loans stood at RM61,861 as at the same date.

Media contact
Ang Jae Han
(603) 7628 1020
angjaehan@ram.com.my