Published on 23 Aug 2019.
RAM Ratings has reaffirmed the AAA/Stable rating of the First Notes Series under AmMortgage One Berhad’s (AmMortgage One or the Issuer) RM339.38 million MTN. The MTN was issued in 2009 under AmMortgage’s RM1 billion MTN Programme and involved the securitisation of Telekom Malaysia Berhad’s (TM or the Originator) staff mortgages. As at end-March 2019, the secured portfolio had RM57.75 mil in outstanding principal.
The reaffirmation is premised on the robust credit support provided by the 1.97-time overcollateralisation (OC) ratio of the transaction, which was backed by receivables and RM3.82 mil of cash as at end-March 2019 (end-March 2018: 1.11 times). The improvement in OC was mainly driven by continued deleveraging of the transaction, given the better than assumed portfolio performance. The cumulative net default rate stood at 0.48% against our base-case expectation of 8.09% while the cumulative prepayment rate clocked in at 29.54%. Over the review period, the Issuer had redeemed RM13.99 mil of the outstanding Notes Series, reducing the outstanding principal to RM20.70 mil. Based on present average monthly cash flows and the current portfolio loss performance, we expect the MTN to be fully redeemed in two years, well ahead of the Legal Maturity Date.
We remain cognisant of the transaction’s exposure to a single counterparty – TM – which is the ultimate paymaster of the borrowers’ salaries and the obligor of TM Mortgage Programme fee payments, LTV Compensation and LTV Excess Refunds due to the Issuer. Higher attrition rates may also affect the performance of the underlying portfolio. All things considered, however, we believe this risk is more than adequately addressed by TM’s superior credit profile (TM’s Islamic facilities are accorded a credit rating of AAA/Stable – the highest on RAM’s rating scale), and more than ample collateral cover, which should be able to withstand significant deterioration in TM’s credit rating and asset quality.
To date, we have found 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, to be adequate, as required by the transaction documents.
Teoh Tze Yit
(603) 3385 2531
(603) 3385 2577
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Ratings on AmMortgage One Berhad