RAM Ratings affirms ratings of Al Dzahab’s Tranche 1 to 5 Sukuk and Zamarad’s Tranche 1, 4, 6 and 7 Sukuk

Published on 31 May 2023.

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RAM Ratings has affirmed the ratings of all rated classes under Al Dzahab Assets Berhad’s Tranche 1 to 5 Sukuk Murabahah and Zamarad Assets Berhad’s Tranche 1, 4, 6 and 7 Sukuk Murabahah (see table). 

 

Sukuk Murabahah	Outstanding Amount^ (RM mil)	OC Ratio^ (%)	Rating/Outlook	Rating Action
Al Dzahab Tranche 1
Class A	20.0	439.37	AAA/Stable	Reaffirmed
Class B	25.0	139.72	AAA/Stable	Reaffirmed
Total rated	45.0
Al Dzahab Tranche 2
Class A	30.0	360.70	AAA/Stable	Reaffirmed
Class B	35.0	112.63	AAA/Stable	Reaffirmed
Total rated	65.0
Al Dzahab Tranche 3
Class A	40.0	300.12	AAA/Stable	Reaffirmed
Class B	45.0	88.29	AAA/Stable	Reaffirmed
Total rated	85.0
Al Dzahab Tranche 4
Class A	40.0	258.48	AAA/Stable	Reaffirmed
Class B	35.0	91.19	AAA/Stable	Reaffirmed
Total rated	75.0
Al Dzahab Tranche 5
Class A	95.0	115.85	AAA/Stable	Reaffirmed
Class B	45.0	46.47	AAA/Stable	Reaffirmed
Total rated	140.0
Zamarad Tranche 1
Class A	100.0	122.84	AAA/Stable	Reaffirmed
Class B	45.0	53.68	AAA/Stable	Reaffirmed
Total rated	145.0
Zamarad Tranche 4
Class A	80.0	69.25	AAA/Stable	Reaffirmed
Class B	25.0	28.95	AAA/Stable	Reaffirmed
Total rated	105.0
Zamarad Tranche 6
Class A	65.0	77.11	AAA/Stable	Reaffirmed
Class B	20.0	35.44	AA2/Stable	Reaffirmed
Total rated	85.0
Zamarad Tranche 7
Class A	170.0	55.68	AAA/Stable	Reaffirmed
Class B	40.0	26.03	AA2/Stable	Reaffirmed
Total rated	210.0

OC = overcollateralisation (with cash)

^ As at 31 January 2023

 

Al Dzahab and Zamarad are both special-purpose vehicles incorporated to undertake the securitisation of personal financing (PF) facilities extended to civil servants, originated through the business partners of RCE Marketing Sdn Bhd (RCEM).

The rating affirmations reflect the level of credit support that continues to correspond with the rating of all the tranches under review. Overall, loss performance of the portfolios backing the respective tranches have been lower than assumed with prepayments largely in line with expectations although higher in 2022 relative to prior years. Notably, Al Dzahab’s Tranche 1 to 4 Sukuk are fully cash-backed and repayment of profit and capital are no longer dependent on future performance of the securitised receivables portfolio. Al Dhazab, therefore, is likely to fully redeem all the outstanding Class A and Class B sukuk of Tranche 1 to 4 on their expected maturity dates of 21 June 2023, 29 September 2023, 29 March 2024 and 11 September 2024, respectively. 

For Zamarad’s Tranche 6 and 7 which include a Revolving Option (RO), we expect the utilisation of excess cash reserves for the purchase of new receivables, if any, to preserve the required credit support for the respective AAA and AA2 ratings for Class A and Class B Sukuk. The transaction terms require that any exercise of the RO shall not have any adverse impact on the existing ratings.

During the review period, no major deterioration was observed in the delinquency and default rates of the securitised portfolios. Some fluctuations in timing of collections were mainly due to administrative delays amid the holiday or festive seasons. Given the non-discretionary salary deductions by which the PF is repaid and low attrition rate of civil servants, delinquency and default rates are anticipated to sustain at current levels. That said, prepayments may stay elevated, albeit still within our expectations as the rising cost of living owing to inflationary pressures will likely increase refinancing activities, particularly of more seasoned PF. As expected, the change in the servicer for both sukuk programmes to EXP Payment Sdn Bhd – a wholly owned subsidiary of RCE Capital Berhad – on 1 July 2022 has not had any adverse impact on servicing duties to the securitised receivables.

The proposed enactment of the Consumer Credit Act could see tighter regulations on PF going forward. Although RCEM does not fall under Bank Negara Malaysia’s purview, its underwriting standards are guided by the central bank’s lending guidelines. Nonetheless, we note that existing issues that are backed by static pools of receivables will not be impacted by changes in legislation or regulations on future receivables.

Analytical contacts
Joel Thum
(603) 3385 2517
joel@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 2023 by RAM Rating Services Berhad

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