MARC has affirmed its AAAIS
rating on Cagamas MBS Berhad’s (Cagamas MBS) RM2,050.0 million asset-backed
Sukuk Musyarakah issuance (CMBS 2005-1) with a stable outlook. The sukuk
programme has an outstanding amount of RM810.0 million as at end-September
2016.
Cagamas MBS is a wholly-owned special purpose vehicle
of Cagamas Holdings Berhad and was established to undertake the securitisation
of conventional and Islamic home financing originated by the Malaysian
government. CMBS 2005-1 is backed by a pool of government staff Islamic home
financing (GSIHF), or Portfolio 2005-1. Repayment risk is low as the periodic
obligations of CMBS 2005-1 are met through direct salary or pension deductions
monthly.
The affirmed rating is premised on CMBS 2005-1’s
strong credit enhancement level of 220.4% as of September 30, 2016 (Quarter 46)
with a combined cash at bank and permitted investments of RM597.9 million and
outstanding principal of non-defaulted home financing of RM1,187.1 million
comprising 28,790 fixed-rate accounts. MARC is of the view that the current
credit enhancement level would allow CMBS 2005-1 to withstand any adverse
performance of the collateral pool in respect of defaults and prepayments.
The performance of Portfolio 2005-1 remains
satisfactory as at Quarter 46 with a cumulative default rate (CDR) of 0.79% of
the initial pool balance, which remains well below MARC’s projected CDR of
4.60%. Defined as accounts in arrears exceeding nine months, the defaults were
mainly due to administrative delays in deduction on changes in customers’
status and processing time on takaful claims on deceased customers. Irregular
delinquency rates (accounts in arrears for three months or less) were mainly
due to technical issues pertaining to the timing of monthly salary deductions
or payment centres updating into the Sistem Pinjaman Perumahan Bersepadu (collection
system).
Portfolio 2005-1’s cumulative prepayment rate was
13.91% as at Quarter 46, while the average quarterly prepayment rate for the
current review period remained stable at 0.30% (Quarter 42: 12.81%; 0.31%).
MARC notes that in the event of an unexpectedly high volume of prepayments, the
risk of a negative carry position will be mitigated by the transaction’s
conditional pass-through provision feature which allows for partial early
redemption of CMBS 2005-1’s Tranche 6 which matures in August 2020. This is,
however, subject to the availability of at least RM66.0 million in CMBS
2005-1’s collection account post-redemption. MARC also notes that Portfolio
2005-1’s weighted average term to maturity of 9.6 years against the remaining
term to maturity of 3.5 years of CMBS 2005-1 further reduces the risk of an
asset-liability mismatch.
MARC expects the upcoming redemption of Tranche 5 of
RM410.0 million on August 8, 2017 to be met by the current cash and cash
equivalents of RM597.9 million as at end-September 2016.
The stable outlook is premised on the rating agency’s
expectation of continued stable collateral performance and a sustained high
credit enhancement level that remains supportive of the rating.
Contacts: Norehan Ikhlas, +603-2082 2257/ norehan@marc.com.my; Sharidan Salleh, +603-2082 2254/ sharidan@marc.com.my.
May 18, 2017
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