Published on 22 Jun 2021.
RAM Ratings has upgraded from AA1 to AAA the rating of the RM20 million Senior Class B Notes under Premier Auto Assets Berhad’s (Premier Auto or the Issuer) RM105 million Tranche 1 Medium Term Notes (Tranche 1 MTN). Concurrently, the AAA rating of the remaining RM35 million Senior Class A Notes has been reaffirmed. Both ratings have a stable outlook.
The rating actions are premised on the fully cash-collateralised position of the Tranche 1 MTN, attributable to the strong credit quality of Premier Auto’s underlying hire-purchase (HP) portfolio. This follows resilient collections and higher than expected prepayment which contributed to faster cash accumulation in the designated accounts. As at end-April 2021, the RM59.7 mil of cash balances backing the Tranche 1 MTN are more than sufficient to cover all interest obligations and the outstanding RM55 mil of senior MTNs. The Issuer intends to fully redeem the Tranche 1 MTN ahead of the next scheduled maturity on 19 July 2021, subject to noteholders’ approval to be procured by end-June 2021 at a redemption premium to be agreed. The transaction terms allow the Issuer to early redeem the Senior Class Notes in full and not in piecemeal, at a redemption premium to be determined and calculated by the facility agent.
Overall, apart from the period during which the first Movement Control Order (MCO 1.0) was in effect, the performance of the HP receivables was unperturbed by subsequent movement restrictions. This is evident from the above 92% monthly collection rate. The cumulative net default rate also improved to 3.52% as at end-April 2021 from 12.13% a year earlier. The better showing mainly resulted from collection efforts to manage asset quality and the introduction of online payment channels, currently utilised by about 75% of accounts. Owing to present uncertainties amid the pandemic, ELK Desa Capital Sdn Bhd (the Originator and Servicer) has tightened its underwriting criteria and will originate new loans with caution until there is better visibility on the economy’s recovery prospects.
The Issuer is a special-purpose vehicle incorporated specifically to facilitate the Originator’s fundraising exercise via the securitisation of the latter’s portfolio of second-hand motor vehicle financing receivables. ELK-Desa Capital is a wholly owned subsidiary of ELK-Desa Resources Berhad, an investment holding company listed on the Main Market of Bursa Malaysia since December 2012.
Yip Chee Meng
(603) 3385 2516
(603) 3385 2577
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Ratings on Premier Auto Assets Berhad