Published on 16 January 2014
RAM Ratings has reaffirmed the
A1/Stable/P1 ratings of Blondal Resources Sdn Bhd’s (Blondal Resources or the
Issuer) RM70 million CP/MTN Programme. Blondal Resources, a wholly owned
subsidiary of Primuda Sdn Bhd, which is in turn 100%-held by Blondal Sdn Bhd
(Blondal or the Group), had been specifically incorporated to undertake the
securitisation of the hire-purchase (HP) receivables of the Group. Blondal is
in the direct-selling business involving household and industrial appliances
under the Lux, HydroGuard and Stada brands; Primuda is the provider of HP
financing for these products.
The reaffirmation of the ratings
is underpinned by the transaction’s sturdy collateralisation ratio of 204%
against the minimum covenanted 180%. As at end-July 2013, Blondal Resources had
RM10 million of outstanding CP, supported by a RM17.51 million pool of
outstanding HP receivables (the Portfolio). This level of asset coverage is
above our required collateralisation of 166% under an A1 stress scenario. The
higher-than-required collateralisation – a result of continuous replacement of
defaulted/repossessed receivables – provides additional cushion against any
further increase in the net defaults experienced by the Portfolio.
As at end-July 2013, the
cumulative peak net default rate of the securitised pool since issuance stood
at 6.86%, against our base-case assumption of 6.50%. We have maintained our
base-case assumption as newer receivables derived from the purchase of
point-of-entry products (which now form 90% of the securitised pool, consistent
with the shift in Blondal’s product range) show lower cumulative net default
rates of 6.00% to 6.50%. Meanwhile, the repossession and prepayment rates of
the Portfolio have remained within our expectations, standing at a respective
17.76% and 0.29% as at end-July 2013.
RAM expects the transaction to
self-amortise as it approaches its final maturity on 3 July 2015, given that
the transaction will be backed by eligible receivables (ERs) with remaining
tenures not exceeding that of the CP/MTN Programme. This ensures sufficient
cashflow to meet the final redemption as and when the CPs mature. Under the
transaction, Blondal is required to refund or replace defaulted and repossessed
receivables. Failure to replace them is tantamount to an early amortisation
event, under which Blondal Resources will not be permitted to purchase further
ERs.
That said, we remain cautious of
the possible deterioration in the net defaults and repossession levels of the
Portfolio. The repayment aptitude of Blondal’s customers may be adversely
affected by heightened inflationary pressures following the resumption of the
Government’s subsidy-rationalisation programme and the impending implementation
of the GST. The ratings may come under pressure if the levels of net defaults
and repossessions for the securitised pool are much higher than its current
performance.
Media contact
Lee Sook Wei
(603) 7628 1017
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