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Press Release
30 Aug | Friday
RAM Ratings reaffirms AAA/stable rating of Cagamas MBS’s CMBS 2005-1

RAM Ratings has reaffirmed the AAA/stable rating of Cagamas MBS Berhad’s RM2.05 billion Sukuk Musyarakah Islamic Residential Mortgage-Backed Securities (CMBS 2005-1). Cagamas MBS is a limited-purpose entity incorporated for the purpose of securitising government staff housing loans (GSHLs) and government staff Islamic home financing (GSIHF) facilities.

The rating reaffirmation reflects the fully cash-collateralised position of the RM400 mil Sukuk Musyarakah as at end-December 2018. As at the same date, the transaction’s RM567.52 mil of cash and permitted investments were more than sufficient to meet the remaining Tranche A6’s principal repayment and ongoing profit obligations up to its maturity in August 2020. This is attributable to the portfolio’s better than expected performance since issuance, which has helped it accumulate cash reserves. While the transaction allows a partial redemption of the last tranche of the Sukuk, this option has not been exercised as cash flow arising from excess prepayments has yet to meet the projected amounts, despite having fulfilled the minimum threshold of RM66 mil for the Collections Account. CMBS 2005-1’s portfolio of GSIHF facilities comprised 26,384 accounts, with an average outstanding amount of RM33,509. The weighted-average term to maturity of the CMBS 2005-1 pool stood at 7.60 years.
 
Under Budget 2019, civil servants (grade 54 and below) and pensioners received a one-off special payment of RM500 and RM250, respectively, while pensioners receiving pensions of less than RM1,000 were paid an additional one-off assistance sum of RM500. In addition, the government had introduced the Bantuan Sara Hidup programme early this year – a tiered cash handout scheme where the sum paid out depends on the income level of eligible persons. These initiatives were not observed to have any significant impact on current prepayment levels, likely due to the subsidised profit rates of GSIHF as well as persisting inflationary pressures and affordability issues. While the new administration has provided an assurance that the civil service will not be downsized, there have been proposals to reshuffle and reassign civil servants at all levels, which could result in higher incidences of transfers and, in turn, possibly more administrative delays in deductions. During the review period, the respective delinquency profiles of portfolios under Cagamas MBS Berhad were generally stable.
 
 

Analytical contact
William Tan
(603) 3385 2530
williamtan@ram.com.my

Media contact
Padthma Subbiah
(603) 3385 2577
padthma@ram.com.my

 Date of release: 30 August 2019

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 2019 by RAM Rating Services Berhad

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