MARC has affirmed its AAA rating on Cagamas MBS Berhad’s (Cagamas
MBS) asset-backed fixed rate serial bonds (CMBS 2005-2) of RM2,060.0 million
with a stable outlook. The rating action affects the outstanding bonds
of RM1,315.0 million issued under CMBS 2005-2. The affirmed rating reflects the
robust credit enhancement level of 170.3% on CMBS 2005-2 based on an
outstanding principal balance of non-defaulted mortgages of RM1,510.5 million
and a collection account balance of RM729.0 million. The rating also takes into
account the good performance track record of the underlying collateral pool
(Portfolio 2005-2) comprising government
staff housing loans (GSHL) granted to eligible civil servants and
government pensioners.
Cagamas MBS is a wholly-owned special purpose vehicle of Cagamas
Holdings Berhad established solely for the issuance of mortgage-backed
securities via the securitisation of eligible GSHL originated by the Government
of Malaysia (GOM) under both Islamic and conventional principles. Direct
salary/pension deductions by the Accountant General’s Department/Pension
Administrator form the source of repayment for CMBS 2005-2. The GOM’s Housing
Loans Division, or Bahagian Pinjaman Perumahan (BPP), is the servicer of
Portfolio 2005-2.
Based on the latest servicer report dated March 12, 2015 (Quarter 37),
Portfolio 2005-2 continued to exhibit high credit quality characteristics that
were well within MARC’s expectations, with a cumulative default rate (CDR) of
0.57% and a cumulative prepayment rate of 13.57%. The collateral pool’s CDR was
comfortably below MARC’s assumed rate of 3.05%. GSHL defaults, defined as
accounts in arrears for more than nine months, were mainly attributed to lags
and delays in deductions due to changes in eligibility status of borrowers and
time taken processing insurance claims on deceased borrowers. Meanwhile, average quarterly delinquency rates (mortgages in arrears
between one and nine months) during the period under review (Quarter 34 to
Quarter 37) continued its downtrend to 1.75% from 2.99% (Quarter 30 to Quarter
33) since the implementation of the electronic funds transfer system in the
Accountant General’s Department in 2013. The majority of these delinquent mortgages
were usually resolved in subsequent quarters, as reflected by the collateral
pool’s low CDR.
Cagamas MBS has significant cash buffer in the collection account to
meet the upcoming RM320.0 million redemption of CMBS 2005-2 on December 11,
2015. To mitigate risk of negative carry and asset-liability mismatches due to
high prepayments, CMBS 2005-2 has a conditional reverse pass-through mechanism
which allows early redemption of the back-ended tranches. Given the
transaction’s current strong credit enhancement level and stable historical
default and prepayment rates, MARC views Cagamas MBS as having strong capacity
to withstand an adverse performance of Portfolio 2005-2. Nonetheless, MARC
highlights that the majority of Portfolio 2005-2’s borrowers would be retired
civil servants during the tail-end tenure of CMBS 2005-2 which expires in 2025,
given that the weighted average age of borrowers currently stands at 50 years.
The rating agency expects the performance of the collateral pool in the longer
term to be sustained by at-source pension deductions.
The stable outlook is premised on MARC’s expectation that Portfolio
2005-2 will continue to demonstrate stable performance characterised by a high
credit enhancement level that is supportive of the current rating.
Contacts: Koh Shu Yunn, +603-2082 2243/ shuyunn@marc.com.my; David Lee, +603-2082 2255/ david@marc.com.my.
June 9, 2015
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