RAM Ratings reaffirms AAA/Stable rating of Telekom Malaysia's staff-residential-mortgage-backed notes

Published on 28 August 2015

RAM Ratings has reaffirmed the AAA/Stable rating of the First Notes Series issued by AmMortgage One Berhad, involving the securitisation of staff-housing loans originated by Telekom Malaysia Berhad (TM).
The reaffirmation of the rating is premised on the better-than-assumed default and prepayment performances of the underlying portfolio, which resulted in the faster-than-expected deleveraging of the First Notes Series. The asset cover (overcollateralisation ratio) improved from 23.92% to 36.30%, with RM89.82 million First Notes Series backed by RM118.38 million of outstanding principal receivables and RM4.04 million of cash and permitted investments as at 31 May 2015.
The transaction also benefits from internal and external credit enhancements through various compensation and subsidy mechanisms, such as TM Mortgage Programme Fee Payments, through which the Issuer had received RM31.59 million as at end-May 2015. The transaction’s default and prepayment experiences have continued to outperform our stressed assumptions. Based on expected collections, the outstanding First Notes Series can be fully redeemed within the next 4 years.
On balance, the transaction is exposed to the credit profile of TM – rated AAA/Stable/P1 by RAM – given its obligations in relation to some of the credit enhancements, and its role as the ultimate paymaster of the obligors’ salaries. Having said that, we believe that TM’s exceptional financial position and strategic role as Malaysia’s national telecommunication company underscore its superior credit profile. We have also taken into account the servicing ability of the Portfolio Servicer – AmBank (M) Berhad – including its administration of the entire TM Employee Mortgage Scheme for and on behalf of TM. We expect AmBank to adequately perform its servicer responsibilities under the transaction documents.