RAM Ratings has assigned final AAA/Stable and AA3/Stable ratings to Al Dzahab Assets' (the Issuer) RM95 million class A sukuk and RM25 million class B sukuk, respectively. This is the first issuance under Al Dzahab’s RM900 million sukuk murabahah asset-backed securitisation programme (the programme).
The issuance will be collateralised by personal-financing (PF) facilities originated by RCE Marketing (RCEM) through its business partners and extended to civil servants. These facilities are repaid via non-discretionary salary deductions processed by the Accountant General's Department and Angkatan Koperasi Kebangsaan Malaysia, thereby substantially insulating the transaction from the credit risks of the borrowers as long as they remain in active service.
RAM Ratings' cashflow assessment indicates that the underlying portfolio will be able to meet full and timely payment of the financial obligations of Tranche 1 under respective “AAA stress” and “AA3 stress” scenarios for the class A and class B sukuk. The class A sukuk and class B sukuk will be backed by receivables with an outstanding principal value of RM148.6 million and RM3.4 million of cash balances respectively, translating into corresponding over-collateralisation ratios of 60% and 26.66%.
Given the underlying portfolio’s weighted-average (WA) seasoning of only 1.21 years against a WA original tenure of 9.74 years, however, the actual performance of the portfolio as it seasons may deviate from our cashflow assumptions. Furthermore, the historical data reflect a benign period for the industry as a result of regulatory changes.
The transaction structure prioritises the financial obligations in respect of the class A and class B sukuk. Profit on the unrated class C sukuk are payable only after the full redemption of the rated classes. The minimum required balance in the Finance Service Reserve Account can only be utilised to top up any shortfall in meeting the profit obligations vis-à-vis the rated sukuk. In relation to Tranche 1, the issuer will pay fixed servicer fees without any servicer commission or bonus.
RAM Ratings believes that RCEM (as the servicer) is sufficiently “incentivised” to uphold its responsibilities in relation to Tranche 1, as the programme remains a long-term source of funding for the RCE Group. RCEM has been providing and servicing PF facilities for more than 10 years, and this transaction marks its fourth venture into the private debt market, which gives confidence to the conclusion.
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.