RAM Ratings has assigned final AAA/Stable and AA3/Stable ratings to Al Dzahab Assets Berhad’s (the Issuer) RM120.0 million Class A Sukuk and RM35.0 million Class B Sukuk, respectively.

Published on 20 September 2016

RAM Ratings has assigned final AAA/Stable and AA3/Stable ratings to Al Dzahab Assets Berhad’s (the Issuer) RM120.0 million Class A Sukuk and RM35.0 million Class B Sukuk, respectively. These represent the second issuance under Al Dzahab’s RM900.0 million Sukuk Murabahah Asset-Backed Securitisation Programme (the Programme); the first issuance (RM120.0 million Tranche 1 Sukuk) was completed in June 2016. Similar to Tranche 1, the issuance will be collateralised by personal-financing (PF) facilities originated by RCE Marketing Sdn Bhd (RCEM) through its business partners that are extended to civil servants. These facilities are repaid via non-discretionary salary deductions processed by the Accountant General's Department and Angkatan Koperasi Kebangsaan Malaysia Berhad, thereby substantially insulating the transaction from the credit risks of the borrowers as long as they remain in active service.

RAM’s cashflow assessment indicates that the underlying portfolio will be able to meet full and timely payment of the financial obligations of Tranche 2 under respective “AAA stress” and “AA3 stress” scenarios for the Class A and Class B Sukuk. The RM120.0 million Class A Sukuk and RM35.0 million Class B Sukuk will be backed by receivables with an outstanding principal value of RM175.2 million and RM4.2 million of cash balances, translating into respective overcollateralisation ratios of 49.53% and 15.77%.

Given the underlying portfolio’s weighted-average (WA) seasoning of less than 1 year against a WA original tenure of 9.63 years, however, the actual performance of the portfolio as it seasons may deviate from our cashflow assumptions. Furthermore, the historical data reflect a benign period for the industry as a result of regulatory changes. In the immediate term, we may see higher prepayments following the recent salary increments and the resetting of the minimum monthly wage (from RM850 to RM1,200) for civil servants, effective July 2016. That said, the prepayments are unlikely to be significant as the respective maximum loan tenure and amount are still capped at 10 years and at a percentage of the net salaries.

Al Dzahab is a special-purpose vehicle incorporated to undertake the securitisation of receivables originated through the business partners of RCEM. Under the Programme, the Issuer will, from time to time, issue sukuk to fund its acquisition of PF portfolios. Stop-issuance trigger events prohibit further issuance under the Programme should the Servicer’s ability to perform its obligations – including servicing the PF facilities – become impaired.

Analytical contact                                        Media contact
Tan Han Nee                                                 Padthma Subbiah
(603) 7628 1023                                            (603) 7628 1162
Hannee@ram.com.my                                  padthma@ram.com.my