RAM Ratings upgrades rating of Zamarad’s Tranche 1 Class B Sukuk, reaffirms ratings of Al Dzahab’s Tranches 3-5

 

Sukuk Murabahah	Outstanding Amount^ (RM mil)	OC ratio (%)	Rating/ Outlook	Rating Action
Zamarad’s Tranche 1
Class A	160.0	59.92	AAA/Stable	Reaffirmed
Class B	45.0	24.81	AAA/Stable	Upgraded
Total rated	205.0
Al Dzahab’s Tranche 3
Class A	75.0	147.10	AAA/Stable	Reaffirmed
Class B	45.0	54.44	AAA/Stable	Reaffirmed
Total rated	120.0
Al Dzahab’s Tranche 4
Class A	95.0	97.15	AAA/Stable	Reaffirmed
Class B	35.0	44.07	AAA/Stable	Reaffirmed
Total rated	130.0
Al Dzahab’s Tranche 5
Class A	135.0	73.53	AAA/Stable	Reaffirmed
Class B	45.0	30.15	AAA/Stable	Reaffirmed
Total rated	180.0

OC = overcollateralisation (with cash)

^ As at end-December 2020

 

Each tranche of the Sukuk is backed by its own portfolio of personal financing (PF) receivables from civil servants, originated by RCE Marketing Sdn Bhd (RCEM) through its business partners. These receivables are repaid through non-discretionary salary deductions processed by two collection agents – Angkatan Koperasi Kebangsaan Malaysia Berhad and EXP Payment Sdn Bhd (the exclusive agent for Yayasan Ihsan Rakyat’s Accountant General Department of Malaysia Code). The historically low attrition rate of civil servants and non-discretionary repayments via salary deductions reduce the transactions' exposure to a customer’s credit risks as long as the customer remains a government employee.

 

The rating actions reflect the better than assumed loss performance of the portfolios backing the respective tranches, and the resultant strong credit support that is more than sufficient to cover losses assumed in an AAA rating stress scenario. The default experience of the portfolios generally outperformed our base assumptions. Other than some spikes in prepayments in 2H 2020, the average prepayment rates remained well within our stressed assumptions.

 

Despite the recently imposed second Movement Control Order, RCEM does not intend to offer customers a moratorium on repayments. Given that it had only considered requests for deferments on a case-by-case basis last year, less than 0.4% of RCEM’s outstanding PF then had benefited from the moratorium. PF facilities under moratorium are not eligible for securitisation under the sukuk programmes.

Analytical contact

Loh Kit Yoong

(603) 3385 2493

kityoong@ram.com.my

 

Media contact

Padthma Subbiah

(603) 3385 2577

padthma@ram.com.my

 

Date of release: 8 April 2021

 

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.

 

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