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RAM Ratings assigns preliminary ratings to Tranche 9 Sukuk to be issued by RCE Marketing’s financing vehicle, Zamarad
Published on 30 Jun 2023.
RAM Ratings has assigned preliminary ratings of AAA/Stable and AA2/Stable to Zamarad Assets Berhad’s (Zamarad or the Issuer) Tranche 9 RM175.0 mil Class A Sukuk and RM30.0 mil Class B Sukuk, respectively. This is the ninth issuance under Zamarad’s RM2.0 bil Sukuk Murabahah Programme, sponsored by RCE Marketing Sdn Bhd (RCEM or the Originator).
As with the Tranches 6 to 8 Sukuk issued under Zamarad, the Tranche 9 Sukuk will include a Revolving Option (RO). This option allows the Issuer to utilise excess cash in the transaction to acquire new receivables from RCEM, subject to fulfilling certain conditions. Our current assessment of the credit enhancement required for Tranche 9 however assumes that the RO will not be exercised throughout the sukuk’s tenure. Under the transaction terms, the Issuer may only do so if the RO, by itself, does not have any adverse impact on the existing ratings.
As with previous issuances, Tranche 9 will be collateralised by personal financing (PF) facilities extended to civil servants, originated by RCEM through its business partners. The PF will be repaid by way of 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. The compulsory deductions, coupled with the low attrition rate in the civil service, reduce the credit risks of the PF receivables.
Tranche 9 Sukuk will be backed by a portfolio of PF receivables with an outstanding principal balance of RM246.62 mil, based on the cut-off date of 30 April 2023, and a prefunded cash reserve of RM5.14 mil in the Finance Service Reserve Account at issuance. The resultant overcollateralisation ratios of 40.93% and 20.30% for the Class A and B Sukuk, respectively, provide sufficient credit enhancement to mitigate losses in line with levels assumed under AAA and AA2 stress scenarios.
In assessing the adequacy of credit support, we have maintained our base-case assumption for the monthly net default rate at 0.09% and respective low and high prepayment assumptions at 0.035% and 0.80%. This follows our review of the historical loss performances of RCEM’s static pools which were updated last 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 – another sponsored vehicle under RCEM.
Analytical contacts
Liew Kar Ling
(603) 3385 2586
karling@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
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