RAM Ratings assigns preliminary ratings to Tranche 6 Sukuk issuance by RCEM’s financing vehicle, Zamarad

Published on 17 May 2021.

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RAM Ratings has assigned preliminary ratings of AAA/Stable and AA2/Stable to Zamarad Assets Berhad’s (the Issuer) Tranche 6 RM80 mil Class A Sukuk and RM20 mil Class B Sukuk, respectively. This is the sixth issuance under Zamarad’s RM2 bil Sukuk Murabahah Programme (the Programme), sponsored by RCE Marketing Sdn Bhd (RCEM). 

Tranche 6 will be the first issuance under the Programme with a Revolving Option (RO) which allows excess cash in the transaction to be utilised to purchase additional receivables from RCEM, subject to certain conditions such as a weighted average portfolio profit rate threshold and a no rating impact assessment by RAM. Given the assessment requirement of the RO, our current assessment on the required credit enhancement assumes no RO is exercised throughout the sukuk tenure.

As with previous issuances, Tranche 6 will be backed by personal financing (PF) facilities extended to civil servants, originated by RCEM through its business partners. The PF will be repaid via non-discretionary salary deductions processed by Angkatan Koperasi Kebangsaan Malaysia Berhad and EXP Payment Sdn Bhd (the exclusive agent for Yayasan Ihsan Rakyat’s Accountant General’s Department of Malaysia Code). The historically low attrition rate of civil servants and non-discretionary repayments via salary deductions reduce the transaction’s exposure to the customer’s credit risks as long as the customer remains a government employee.

Tranche 6 will be backed by a portfolio of PF with an outstanding principal value of RM119.9 mil as at 31 March 2021 and required cash reserves of RM2.2 mil at closing. The resultant overcollateralisation ratios (excluding cash reserves) of 49.90% and 19.92% for the Class A and Class B Sukuk, respectively, provide credit enhancement sufficient to mitigate losses in line with the levels assumed for the assigned ratings. 

In assessing the required credit enhancement, we have applied loss assumptions and stress scenarios similar to those employed for the last five tranches issued by Zamarad. Notably, the default experiences of securitised pools backing the outstanding tranches have stayed below our base assumptions to date. Other than some spikes in prepayments in 2H 2020, the average prepayment rate remained well within our stressed assumptions. 

RCEM did not offer customers a moratorium on repayments during the second Movement Control Order. Moving forward, RAM will closely monitor the developments in this regard and reassess if required. Having only considered such requests on a case-to-case basis last year, less than 0.4% of its outstanding PF then had benefited from payment deferments. PF facilities under moratorium are not eligible for securitisation under the Programme. 

Analytical contact
Jack Kwan
(603) 3385 2532

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
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