Published on 02 September 2014
RAM Ratings has assigned global rating of gA2(s)/Stable to
Cagamas Global P.L.C.’s (Cagamas Global) proposed Multi-Currency MTN Programme
of USD2.5 billion (the EMTN Programme). The enhanced rating reflects Cagamas
Berhad’s (the Company) credit risk profile as the guarantor of the Notes issued
under the EMTN Programme.
Cagamas Global – incorporated in Labuan – is a funding
vehicle set up as a wholly owned subsidiary of Cagamas, to undertake the
issuance of the Notes under the EMTN Programme. Cagamas’ gA2/Stable/gP1 ratings
are underpinned by its robust asset quality, solid capitalisation and systemic
position within the Malaysian capital markets in its role as a liquidity
provider. The Company also carries AAA/Stable/P1 and seaAAA/Stable/seaP1 on
RAM’s national and ASEAN scales, respectively. Given Cagamas’ systemic
importance, RAM believes that support will be readily extended in the event of
any financial distress. As such, its ratings are correlated with Malaysia’s
sovereign ratings to some extent. Any movement in Malaysia’s sovereign ratings
could lead to a change in the Company’s ratings and, consequently, that of the
EMTN Programme.
As Malaysia’s national mortgage corporation, Cagamas
supports the Government’s objective of widespread homeownership for the people
and also promotes the long-term development of the domestic capital markets.
Although Cagamas’ operations are locally based at present, the Company is also
exploring opportunities to establish a regional footprint, building on its
experience in developing secondary mortgage markets. The proposed EMTN
Programme will place Cagamas in a good position to access the international
markets to support its growth. This will also further diversify its investor
base, which is currently skewed towards domestic financial and institutional
investors.
Cagamas’ assets mainly comprise loans/financing purchased on
a “with recourse” (PWR) and “without recourse” (PWOR) basis. RAM highlights
that some 92% of the Company’s PWR exposures constitutes counterparties with at
least AA ratings. Meanwhile, its PWOR exposure jumped up to 61% of its total
receivables as at end-December 2013 (end-December 2012: 46%), attributable to
new purchases of housing loans/financing last year. The repayments of these
housing loans/financing are non-discretionary and directly deducted from the
borrowers’ salaries. Given that non-discretionary salary deductions at source
are a key feature of its PWOR portfolio, the significant increase will not
affect the portfolio’s overall asset quality. Cagamas’ selective approach to
expanding its PWOR portfolio is also reflected in its low impaired-loan ratio
of 0.6% as at the same date, against the Malaysian banking system’s 1.5% for
residential mortgages. Furthermore, the Company’s overall risk-weighted
capital-adequacy ratio of 24.3% is deemed superior as it is mainly underscored
by high-quality capital such as common shares and retained earnings.
RAM has also reaffirmed Cagamas’ global-scale, ASEAN-scale
and national-scale corporate credit ratings at gA2/Stable/gP1,
seaAAA/Stable/seaP1 and AAA/Stable/P1, respectively. The national-scale ratings
of its other rated instruments, i.e. RM40 billion Islamic and Conventional MTN
Programmes (2007/2047) and RM5 billion Islamic CP/MTN Programme (2010/2040),
have also been reaffirmed at a respective AAA/Stable/- and AAA/Stable/P1.
Media contact
Lee Sook Wei
(603) 7628 1017
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