RAM Ratings reaffirms AAA/Stable rating of AmMortgage’s First Notes Series backed by TM staff mortgage loans

Published on 23 Aug 2019.

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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.

Analytical contact
Teoh Tze Yit
(603) 3385 2531

Media contact
Padthma Subbiah
(603) 3385 2577

The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2019 by RAM Rating Services Berhad


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