Published on 05 Jan 2018.
RAM Ratings has lifted the negative Rating Watch on Premium Commerce Berhad’s (PCB or the Issuer) Class A and Class B Notes under its Notes Series 2016-A. Concurrently, we have reaffirmed the respective AAA and AA2 ratings of the Class A and Class B Notes; the ratings have a stable outlook. As at end-August 2017, RM179.0 million of Class A Notes and RM4.5 million of Class B Notes remained outstanding.
The resolution of the negative Rating Watch and the reaffirmation of the ratings follow the bondholders’ approval of the Issuer’s proposed resolution on 28 December 2017. PCB had proposed to extend the maturities of 2 of the 5 series under its Class A Notes (at higher coupon rates), to address the increased liquidity risk arising from the marked deviation in the underlying portfolio’s default and prepayment performance relative to its earlier securitised portfolios. The resolution effectively alleviates the liquidity concerns, even after assuming higher stressed default and lower prepayment scenarios. We believe that these revised assumptions for the 2016-A Notes are more reflective of the trends exhibited by TC Capital Resources Sdn Bhd’s (TCCR or the Originator) more recently originated loan portfolios from 2014 to June 2017, as well as the performance of its more recent securitised portfolios.
The reaffirmation of the ratings also reflects the available credit enhancement that provides ample support to the ratings. As at end-August 2017, the overcollateralisation ratios for the Class A and Class B Notes stood at 8.93% and 6.38%, respectively, supported by RM193.30 million of outstanding principal and RM11.49 million in the Collection Account. The ratings do not, however, address the risk of early redemption associated with these debt facilities.
This transaction involves the securitisation of automobile hire-purchase (HP) receivables originated by TCCR under PCB’s Asset-Backed RM2 billion MTN Programme. TCCR is the HP financing arm of Tan Chong Motor Holdings Berhad, which in turn holds the exclusive rights for the assembly and distribution of Nissan, Infiniti, Renault and Ultimate Dependability (UD) vehicles in Malaysia.
Analytical contact
Tan Han Nee
(603) 7628 1023
hannee@ram.com.my
Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my
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