Published on 17 Jun 2020.
RAM Ratings has reaffirmed the AAA/Stable rating of Cagamas MBS Berhad’s RM2.05 bil Sukuk Musyarakah Islamic residential mortgage-backed securities (CMBS 2005-1). Cagamas MBS is a limited-purpose entity incorporated for the purpose of securitising government staff housing loans (GSHLs) and government staff Islamic home financing facilities (GSIHFs). The repayment of the GSIHFs stems from non-discretionary direct deductions of civil servant salaries and pensions, which reduce exposure to the borrowers’ credit risks.
The rating reaffirmation reflects the fully cash-collateralised position of the outstanding RM400 mil CMBS 2005-1 as at end-September 2019. The transaction’s cash balance and permitted investments, totalling RM692.32 mil as at the same date, were more than sufficient to meet the remaining principal repayment and ongoing profit obligations up to the maturity date, i.e. 7 August 2020. This is attributable to the portfolio’s better than expected loss performance, which has helped the accumulation of cash reserves.
Lembaga Pembiayaan Perumahan Sektor Awam (LPPSA) – the servicer of the portfolio – announced on 8 April that it would not grant borrowers any financing moratorium, notwithstanding the six-month deferment of loan payments offered by banks to individuals and SMEs to minimise Covid-19-induced disruptions. We also understand that LPPSA has not allowed any request from borrowers to defer or restructure financing to date. Nevertheless, any form of relief, if granted, would not affect the transaction given that it is fully cash-backed. Similarly, the transaction’s current position will safeguard it against administrative delays in deductions, if any, in the event of higher incidences of transfers due to the reshuffling and reassignment of civil servants under the new administration.
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Ratings on Cagamas MBS Berhad CMBS 2005-1