Published on 14 Oct 2022.
RAM Ratings has assigned preliminary ratings of AAA/Stable and AA2/Stable to Zamarad Assets Berhad’s (Zamarad or the Issuer) Tranche 8 RM140 mil Class A Sukuk and RM35 mil Class B Sukuk, respectively. This is the eighth issuance under Zamarad’s RM2 bil Sukuk Murabahah Programme (the Programme), sponsored by RCE Marketing Sdn Bhd (RCEM or the Originator).
Tranche 8 is the third issuance under the Programme to have a Revolving Option (RO) which allows excess cash in the transaction to be utilised to purchase additional receivables from RCEM, subject to fulfilling certain conditions. Among these, the purchase must meet a minimum weighted average profit rate based on the original portfolio acquired at issuance, and the exercise of the option must have no rating impact under RAM’s assessment. Given the latter, our current assessment of required credit enhancement assumes that the RO will not be exercised throughout the tenure of Tranche 8.
As with previous issuances, Tranche 8 will be collateralised 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 (EXP, the exclusive agent for Yayasan Ihsan Rakyat’s Accountant General’s Department of Malaysia Code). The non-discretionary deductions and the low attrition rate of civil servants, even during pandemic-induced lockdowns, reduce the transaction’s exposure to the customers’ credit risks as long as they remain in active service.
Tranche 8 Sukuk will be backed by a portfolio of PF receivables with an outstanding principal value of RM212.6 mil, based on the cut-off date of 31 July 2022, and a cash reserve of RM[4.6mil] at closing. Our cashflow assessment indicates that the resultant overcollateralisation rates of 51.86% and 21.49% for the Class A and Class B Sukuk, respectively, are commensurate with the AAA and AA2 ratings.
In assessing the adequacy of credit support, we have maintained our base-case assumption for the monthly net default rate at 0.09% and our low and high prepayment assumptions at 0.035% and 0.80%, respectively, after a review of the historical loss performances of RCEM’s updated static pools early this year, comprising PF originated from January 2017 to October 2021 (58 static pools). The default and prepayment rates remained largely in line with our existing assumptions. The stress scenarios applied in our rating analysis are similar to those employed for all tranches issued under Zamarad and Al Dzahab Assets Berhad (Al Dzahab), also a sponsored vehicle under RCEM.
Effective 1 July 2022, EXP – a wholly owned subsidiary of RCE Capital Berhad (RCE Cap) – became the appointed Servicer of existing tranches under Zamarad’s and Al Dzahab’s sukuk programmes, replacing RCEM. EXP will also be the Servicer for Tranche 8. This is to streamline the RCE Cap group’s collection and recovery operations under EXP. The replacement servicing agreement executed for this purpose saw no variation in the roles and responsibility or remuneration of the Servicer. The agreement stipulates that EXP shall remain a subsidiary of RCE Cap so long as the sukuk remains outstanding. We are of the view that the change in servicer has no implication on the ratings.
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Tan Han Nee
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