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RAM Ratings upgrades Zamarad’s Tranche 4 Class B Sukuk to AAA, revises outlook on Tranche 5 Class B to positive
Published on 27 May 2022.
RAM Ratings has upgraded the rating of Zamarad Assets Berhad’s (Zamarad or the Issuer) Tranche 4 Class B Sukuk Murabahah to AAA/Stable from AA2/Stable. We have also revised the rating outlook on Tranche 5 Class B Sukuk to positive from stable (see table). The ratings of both Class A and Class B Sukuk under Tranche 1 and 6 have been reaffirmed. Zamarad is a special-purpose vehicle incorporated to undertake the securitisation of personal financing (PF) facilities originated through the business partners of RCE Marketing Sdn Bhd (RCEM).
|
Sukuk Murabahah |
Outstanding Amount^ |
OC Ratio^ (%) |
Rating/ |
Rating Action |
|---|---|---|---|---|
|
Tranche 1 |
||||
|
Class A |
160.0 |
70.48 |
AAA/Stable |
Reaffirmed |
|
Class B |
45.0 |
33.06 |
AAA/Stable |
Reaffirmed |
|
Total rated |
205.0 |
|
|
|
|
Tranche 4 |
||||
|
Class A |
80.0 |
58.47 |
AAA/Stable |
Reaffirmed |
|
Class B |
25.0 |
20.74 |
AAA/Stable |
Upgraded from AA2/Stable |
|
Total rated |
105.0 |
|
|
|
|
Tranche 5 |
||||
|
Class A |
70.0 |
44.76 |
AAA/Stable |
Reaffirmed |
|
Class B |
15.0 |
19.21 |
AA2/Positive |
Reaffirmed/Revised from Stable |
|
Total rated |
85.0 |
|
|
|
|
Tranche 6 |
||||
|
Class A |
80.0 |
55.75 |
AAA/Stable |
Reaffirmed |
|
Class B |
20.0 |
24.60 |
AA2/Stable |
Reaffirmed |
|
Total rated |
100.0 |
|
|
|
^ As at 28 February 2022
Each tranche of the Sukuk is backed by its own portfolio of PF receivables from civil servants. The PF facilities are repaid through non-discretionary salary deductions processed by the Accountant General’s Department via EXP Payment Sdn Bhd and Angkatan Koperasi Kebangsaan Malaysia Berhad, an apex cooperative. This reduces the transaction’s exposure to the customers’ credit risks, so long as they remain in active service.
The rating actions reflect the better than assumed default performance of the portfolios backing the respective tranches, resulting in solid credit support commensurate with the ratings of the respective classes. The positive outlook on the Tranche 5 Class B Sukuk is based on improving credit enhancement that is likely to support a higher rating in the near term. For Tranche 6, we expect the utilisation of excess cash reserves for the purchase of new receivables under the revolving option would at least preserve the required credit support for the existing issue ratings. RAM will reassess the ratings for any credit impact if the revolving option is exercised. Moving forward, the portfolios’ delinquency performance is anticipated to remain stable and within our assumptions in view of the non-discretionary salary deductions and low attrition rate in the civil service sector.
We note that prepayments were generally more volatile during the review period, with spikes observed due to the backlog in processing prepayment applications during the movement control order period and increased refinancing incentivised by promotional campaigns and/or lower profit rates. That said, overall prepayments of the portfolios were largely within our high and low stress assumptions. As the overnight policy rate is expected to rise following market recovery, prepayments will likely moderate as the rising interest/profit rate environment would disincentivise refinancing.
Analytical contacts
Zachary Tan
(603) 3385 2612
zachary@ram.com.my
Lim Chern Yit
(603) 3385 2528
chernyit@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 2022 by RAM Rating Services Berhad
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