RAM Ratings Reaffirms Rating of RCE-sponsored Tranche 1 Class A Sukuk, Upgrades Rating of Class B Sukuk

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1. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications RAM​ ​Ratings​ ​Reaffirms​ ​Rating​ ​of​ ​RCE-sponsored Tranche​ ​1​ ​Class​ ​A​ ​Sukuk,​ ​Upgrades​ ​Rating​ ​of​ ​Class B​ ​Sukuk 12​ ​September​ ​2017 RAM​ ​Ratings​ ​has​ ​reaffirmed​ ​the​ ​AAA​ ​rating​ ​of​ ​Al-Dzahab​ ​Assets​ ​Berhad's​ ​(the​ ​Issuer)​ ​RM95.0 million​ ​Tranche​ ​1​ ​Class​ ​A​ ​Sukuk​ ​and​ ​upgraded​ ​the​ ​rating​ ​for​ ​its​ ​RM25.0​ ​million​ ​Tranche​ ​1​ ​Class B​ ​Sukuk,​ ​from​ ​AA3​ ​to​ ​AA1.​ ​Concurrently,​ ​the​ ​outlook​ ​on​ ​the​ ​Class​ ​A​ ​Sukuk​ ​has​ ​been​ ​reaffirmed at​ ​stable;​ ​the​ ​outlook​ ​on​ ​the​ ​Class​ ​B​ ​Sukuk​ ​has​ ​been​ ​revised​ ​from​ ​stable​ ​to​ ​positive.​ ​The Tranche​ ​1​ ​Sukuk​ ​is​ ​the​ ​first​ ​issuance​ ​under​ ​Al​ ​Dzahab's​ ​RM900.0​ ​million​ ​Sukuk​ ​Murabahah Asset-Backed​ ​Securitisation​ ​Programme​ ​(the​ ​Programme);​ ​3​ ​issuances​ ​have​ ​been​ ​completed​ ​to date​ ​since​ ​June​ ​2016,​ ​bringing​ ​the​ ​total​ ​rated​ ​amount​ ​to​ ​RM430.0​ ​million.​ ​Tranche​ ​1​ ​is collateralized​ ​by​ ​a​ ​portfolio​ ​of​ ​personal-financing​ ​(PF)​ ​facilities​ ​(extended​ ​to​ ​civil​ ​servants) originated​ ​by​ ​RCE​ ​Marketing​ ​Sdn​ ​Bhd​ ​(RCEM)​ ​through​ ​its​ ​business​ ​partners,​ ​repaid​ ​via non-discretionary​ ​salary​ ​deductions​ ​processed​ ​by​ ​the​ ​Accountant​ ​General's​ ​Department​ ​and Angkatan​ ​Koperasi​ ​Kebangsaan​ ​Malaysia​ ​Berhad.​ ​This​ ​repayment​ ​mechanism​ ​substantially insulates​ ​the​ ​transaction​ ​from​ ​the​ ​credit​ ​risks​ ​of​ ​the​ ​borrowers,​ ​as​ ​long​ ​as​ ​they​ ​remain​ ​in​ ​active service. The​ ​rating​ ​actions​ ​on​ ​the​ ​Class​ ​A​ ​and​ ​Class​ ​B​ ​Sukuk​ ​are​ ​premised​ ​on​ ​the​ ​securitised​ ​portfolio's better-than-assumed​ ​default​ ​and​ ​prepayment​ ​performance,​ ​which​ ​have​ ​resulted​ ​in​ ​better​ ​credit support​ ​corresponding​ ​to​ ​their​ ​respective​ ​AAA​ ​and​ ​AA1​ ​ratings.​ ​The​ ​revision​ ​of​ ​the​ ​Class​ ​B Sukuk's​ ​rating​ ​outlook​ ​-​ ​from​ ​stable​ ​to​ ​positive​ ​-​ ​indicates​ ​that​ ​its​ ​rating​ ​may​ ​be​ ​raised​ ​further​ ​if the​ ​current​ ​performance​ ​of​ ​the​ ​underlying​ ​portfolio​ ​can​ ​be​ ​sustained​ ​in​ ​the​ ​near​ ​term.​ ​If​ ​so,​ ​we expect​ ​the​ ​collateral​ ​support​ ​for​ ​the​ ​Class​ ​B​ ​Sukuk​ ​to​ ​build​ ​up​ ​rapidly,​ ​to​ ​the​ ​extent​ ​that​ ​it​ ​will provide​ ​sufficient​ ​protection​ ​at​ ​a​ ​higher​ ​rating​ ​against​ ​losses​ ​from​ ​defaults​ ​and​ ​prepayments. Additionally,​ ​the​ ​transaction​ ​fully​ ​traps​ ​all​ ​residual​ ​cashflow​ ​until​ ​the​ ​5th​ ​anniversary,​ ​when​ ​the Issuer​ ​may​ ​exercise​ ​its​ ​option​ ​to​ ​redeem​ ​all​ ​the​ ​Tranche​ ​1​ ​Sukuk​ ​outstanding​ ​at​ ​that​ ​time, thereby​ ​adding​ ​further​ ​credit​ ​protection​ ​to​ ​the​ ​Sukuk. RAM's​ ​cashflow​ ​assessment​ ​indicates​ ​that​ ​the​ ​underlying​ ​portfolio​ ​will​ ​be​ ​able​ ​to​ ​meet​ ​full​ ​and timely​ ​payment​ ​of​ ​the​ ​financial​ ​obligations​ ​on​ ​Tranche​ ​1​ ​under​ ​the​ ​respective​ ​''AAA''​ ​and​ ​''AA1'' stress​ ​scenarios​ ​for​ ​the​ ​Class​ ​A​ ​and​ ​Class​ ​B​ ​Sukuk.​ ​The​ ​RM95.0​ ​million​ ​Class​ ​A​ ​Sukuk​ ​and RM25.0​ ​million​ ​Class​ ​B​ ​Sukuk​ ​are​ ​supported​ ​by​ ​receivables​ ​with​ ​an​ ​outstanding​ ​principal​ ​value of​ ​RM137.58​ ​million​ ​plus​ ​RM22.4​ ​million​ ​of​ ​cash​ ​reserves,​ ​translating​ ​into​ ​respective overcollateralisation​ ​ratios​ ​of​ ​68.39%​ ​and​ ​33.31%.
2. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications During​ ​the​ ​period​ ​under​ ​review,​ ​Tranche​ ​1's​ ​performance​ ​came​ ​within​ ​RAM's​ ​expectations,​ ​and also​ ​in​ ​line​ ​with​ ​that​ ​of​ ​the​ ​rest​ ​of​ ​Al​ ​Dzahab's​ ​securitised​ ​portfolios.​ ​Monthly​ ​net​ ​defaults​ ​(as measured​ ​by​ ​RCEM)​ ​continued​ ​tracking​ ​RAM's​ ​base-case​ ​expectations,​ ​as​ ​did​ ​prepayment patterns​ ​that​ ​fell​ ​within​ ​the​ ​assumed​ ​high​ ​and​ ​low​ ​scenarios,​ ​although​ ​we​ ​observe​ ​some seasonal​ ​behaviour​ ​during​ ​the​ ​same​ ​span.​ ​These​ ​had​ ​followed​ ​salary​ ​increments​ ​for​ ​civil servants​ ​in​ ​July​ ​2016,​ ​as​ ​well​ ​as​ ​the​ ​launch​ ​of​ ​a​ ​one-off​ ​promotion​ ​by​ ​RCEM.​ ​Barring​ ​any​ ​new competitive​ ​terms​ ​introduced​ ​by​ ​market​ ​players​ ​or​ ​further​ ​salary​ ​hikes,​ ​we​ ​do​ ​not​ ​expect​ ​any significant​ ​increase​ ​in​ ​prepayments​ ​given​ ​the​ ​tighter​ ​lending​ ​regulations​ ​for​ ​personal​ ​financing. Despite​ ​disrupted​ ​collections​ ​earlier​ ​this​ ​year​ ​that​ ​had​ ​resulted​ ​in​ ​some​ ​deterioration​ ​in​ ​the ageing​ ​profile​ ​for​ ​the​ ​underlying​ ​portfolio​ ​of​ ​the​ ​Tranche​ ​1​ ​Sukuk,​ ​the​ ​portfolio​ ​has​ ​not​ ​shown any​ ​material​ ​credit​ ​impairment.​ ​The​ ​monthly​ ​collection​ ​rate​ ​for​ ​RCEM's​ ​PF​ ​facilities​ ​recovered​ ​to above​ ​100%​ ​in​ ​June​ ​amid​ ​the​ ​servicer's​ ​increased​ ​collection​ ​efforts.​ ​All​ ​in​ ​all,​ ​we​ ​expect​ ​the portfolio's​ ​performance​ ​to​ ​remain​ ​stable​ ​although​ ​we​ ​will​ ​maintain​ ​close​ ​monitoring​ ​on​ ​it.​ ​We believe​ ​that​ ​RCEM​ ​has​ ​sufficient​ ​experience​ ​and​ ​capabilities​ ​to​ ​manage​ ​the​ ​delinquencies​ ​and defaults​ ​on​ ​its​ ​receivables. Al​ ​Dzahab​ ​is​ ​a​ ​special-purpose​ ​vehicle​ ​incorporated​ ​to​ ​undertake​ ​the​ ​securitisation​ ​of receivables​ ​originated​ ​through​ ​the​ ​business​ ​partners​ ​of​ ​RCEM.​ ​Under​ ​the​ ​Programme,​ ​the Issuer​ ​will,​ ​from​ ​time​ ​to​ ​time,​ ​issue​ ​sukuk​ ​to​ ​fund​ ​its​ ​acquisition​ ​of​ ​PF​ ​portfolios.​ ​Stop-issuance trigger​ ​events​ ​prohibit​ ​further​ ​issuance​ ​under​ ​the​ ​Programme​ ​should​ ​the​ ​Servicer's​ ​ability​ ​to perform​ ​its​ ​obligations​ ​ ​including​ ​servicing​ ​the​ ​PF​ ​facilities​ ​ ​become​ ​impaired. Organisation​ ​Name: News​ ​Type: RAM​ ​Rating​ ​Services​ ​Berhad RATING​ ​ANNOUNCEMENT Source: BNM​ ​Announcements Media​ ​Contact Padthma​ ​Subbiah (603)​ ​7628​ ​1162 padthma@ram.com.my
3. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications Disclaimer: 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​ ​analysis​ ​and​ ​commentaries,​ ​where​ ​relevant.