FW: RAM Ratings puts PCB 2016-A Notes on negative Rating Watch

 

Published on 29 Sep 2017.

RAM Ratings has placed the AAA and AA2 ratings of Premium Commerce Berhad’s (PCB) RM 204.0 million Class A Notes and RM4.5 million Class B Notes (collectively, the 2016-A Notes), on Rating Watch with a negative outlook. The transaction is a securitisation of a portfolio of hire-purchase (HP) auto loans originated by Tan Chong & Sons Motor Company Sdn Bhd (TCSM) and TC Capital Resources Sdn Bhd (TCCR).

Based on the monthly servicing reports received, the performance of the auto-loan portfolio backing the 2016-A Notes – also PCB’s 10th issue – shows a marked departure from earlier securitised portfolios. In particular, the monthly prepayments rates have fallen much lower than expected, although we note its short performance history of only 8 months. Monthly defaults have also averaged higher than the historical norms of earlier securitised portfolios, albeit still lower than RAM’s projected cumulative loss.  

RAM’s rating action reflects the additional liquidity pressure the 2016-A Notes will face if its performance continues along the current trajectory. We are undertaking the annual rating review of PCB’s outstanding issues and will seek further clarification from the Originator/Servicer, i.e. TCCR. Upon completion of the rating review, we will lift the Rating Watch and announce the appropriate rating action. 

PCB is a special-purpose, bankruptcy-remote entity specifically incorporated to undertake the securitisation of the HP receivables of TCSM and TCCR. TCCR is the HP financing arm of Tan Chong Motor Holdings Berhad, which in turn – via its subsidiaries – holds the sole rights for the assembly and/or distribution of Nissan, Infiniti, Renault and Ultimate Dependability (UD) vehicles in Malaysia.

RAM’s Rating Watch highlights a possible change in an issuer's debt rating. It focuses on identifiable events such as mergers, acquisitions, regulatory changes and operational developments that place a rated debt under special surveillance by RAM. In a broader sense, it covers any event that may result in changes in the risk factors relating to the repayment of principal and interest.

Issues will appear on RAM’s Rating Watch when some of the above events are expected to or have occurred. Appearance on RAM’s Rating Watch, however, does not inevitably mean that the rating will be changed. It only means that a rating is under evaluation by RAM and a final affirmation is expected to be announced. A "positive" outlook indicates that a rating may be raised while a "negative" outlook indicates that a rating may be lowered. A “developing” outlook refers to those unusual situations in which future events are so unclear that the rating may potentially be raised or lowered

Meanwhile, the suspension of a rating signifies that the rating of the affected issue has been “put on hold”. As a rating entails a specific definition and indicates a particular level of credit worthiness, a suspended rating implies that RAM is no longer in a position to form an opinion on the repayment aptitude of the particular issuer in a meaningful manner.

 

Analytical contact
Tan Han Nee
(603) 7628 1023
hannee@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my