RAM Ratings has reaffirmed the respective A2/Stable/-, A3/Stable/- and BBB2/Stable/- ratings of Domayne Asset 2 Corporation Berhad’s (DACB 2) Class A, Class B and Class C Notes (collectively known as “the Senior Notes”).

Published on 21 May 2014

RAM Ratings has reaffirmed the respective A2/Stable/-, A3/Stable/- and BBB2/Stable/- ratings of Domayne Asset 2 Corporation Berhad’s (DACB 2) Class A, Class B and Class C Notes (collectively known as “the Senior Notes”). DACB 2 is a special-purpose vehicle that had been incorporated to undertake the issuance of the Senior Notes, to partially fund the purchase of Eligible Receivables from Diners Club (Malaysia) Sdn Bhd (DCM or the Originator).
In November 2013, the programme terms were revised to accommodate for DCM’s new credit card termed as DinersCash (D-Cash), which is a cash-advance facility to be repaid by instalments. The revision included primarily the eligibility criteria for the D-Cash receivables and the required credit enhancement to inject such receivables into the securitised portfolio; on this note, total financed receivables increased to RM64.64 million in December 2013 from RM46 million prior to the purchase of D-Cash receivables.
Based on monthly transaction administrator report as of calculation date 23 January 2014, the Senior Notes is supported by sufficient credit enhancement in the form of overcollateralisation (OC) of 94.9%, backed by total financed receivables of RM64.64 million, the portfolio composition and cash reserve of RM335,000. The 94.9% OC meets the respective minimum required OC of 37.4% to fund charge- and credit-card receivables and 690.5% for D-cash receivables into the securitised pool under an A2 stress scenario. This and fact that the respective charge-card, credit-card and D-Cash receivables’ key performance parameters such as payment rate, portfolio yields and charge-off rate remained within our base case assumptions drove the ratings reaffirmation.
On a portfolio basis, we observed a more stable collection rates and excess spread, hovering around 30.7%-37.5% and 1.6%-2.1%, respectively, in 2013. Since the inclusion of D-Cash receivables however, these 2 transaction-performance indicators had declined; we note that the 3-month average excess spread had narrowed to 1.2% as at 23 February 2014, close to the 1% rapid-amortisation threshold. Assuming that Diners Malaysia successfully increases card purchases and collections on delinquent accounts, these 2 performance indicators may remain above their thresholds in the near term. Notwithstanding that, the available OC provides sufficient support for the repayment of Senior Notes within the 15-month rapid amortisation period in event of a breach in the rapid amortisation triggers.

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Tan Han Nee
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hannee@ram.com.my