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RAM Ratings reaffirms ratings of Tranches 1 and 2 of RCE Marketing-sponsored Sukuk, upgrades rating of Tranche 5 Class B Sukuk

Published on 11 Nov 2019.

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RAM Ratings has reaffirmed the AAA/Stable ratings of the respective Class A and Class B Notes of Tranches 1 and 2 of Al Dzahab Assets Berhad’s (the Issuer) Sukuk Murabahah. Concurrently, we have upgraded the rating of the Issuer’s Tranche 5 Class B Sukuk Murabahah to AAA/Stable, from AA1/Positive (refer to table below). Al Dzahab is an SPV that had been incorporated to undertake the securitisation of personal-financing (PF) facilities originated through the business partners of RCE Marketing Sdn Bhd (the Originator).

Sukuk Murabahah

Outstanding Amount^
(RM mil)

Overcollateralisation
ratio^

Rating/
Outlook

Rating Action

 Tranche 1

Class A

45.0

176.63%

AAA/Stable

Reaffirmed

Class B

25.0

77.83%

AAA/Stable

Reaffirmed

Total rated

120.0

 

 

 

 Tranche 2

Class A

120.0

78.53%

AAA/Stable

Reaffirmed

Class B

35.0

38.22%

AAA/Stable

Reaffirmed

Total rated

155.0

 

 

 

 Tranche 5

Class A

135.0

64.53%

AAA/Stable

Reaffirmed

Class B

45.0

23.40%

AAA/Stable

Upgraded from AA1/Positive

Total rated

180.0

 

 

 

^Tranche 1 and 2: as at end-July 2019 for Tranche 1 and 2; Tranche 5: as at end-September 2019.
 

Each tranche of the Sukuk is backed by its own respective discrete portfolio of PF receivables from civil servants. As these receivables are paid through non-discretionary salary deductions processed by the Accountant General’s Department and Angkatan Koperasi Kebangsaan Malaysia Berhad (better known as Angkasa), the transaction’s exposure to the credit risks of the borrowers is significantly reduced, as long as the borrowers remain in active service.

The rating reaffirmation is supported by the credit support available for all the rated classes of the Sukuk, which remains commensurate with an “AAA” stress scenario. The rating upgrade for the Tranche 5 Class B Sukuk is premised on its improved credit support, to a level supportive of a higher-stress scenario under the revised rating. The underlying pools’ loss performance that remained within our assumptions contribute to better asset coverage for the respective tranches, as observable in the other tranches under Al Dzahab and Zamarad Assets Berhad – the Originator’s most recent securitisation vehicle. 

Although unlikely at this juncture, downside risks could stem from changes in regulatory policies or guidelines relating to salary deductions, which in turn may affect future delinquencies and the prepayment performance of the underlying receivables. While material downsizing is not expected in the foreseeable future, the Government is studying the need to consolidate agencies and ministries to avoid overlapping functions. This may result in a higher incidence of transfers and, in turn, possibly longer administrative delays in deductions. Prepayments may deviate from our expectations if the Government decides to extend the current retirement age or significantly relax lending guidelines.  


Analytical contact
Tan Han Nee
(603) 3385 2529 
hannee@ram.com.my

Media contact
Padthma Subbiah
(603) 3385 2577
padthma@ram.com.my

 

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



Rating Rationale: Al Dzahab Assets Berhad Tranche 1

Rating Rationale: Al Dzahab Assets Berhad Tranche 2

Rating Rationale: Al Dzahab Assets Berhad Tranche 5

Ratings on Al Dzahab Assets Berhad

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