ABS Samudera Receivables Bhd - 2013 Credit Commentary Report

MARC has affirmed the AA+ rating on ABS Samudera Receivables Berhad’s (ASRB) Notes Series-A issued under its RM250.0 million Medium Term Notes Programme (MTN Programme) with a negative outlook. The principal amount of notes outstanding under the programme has remained at RM1.3 million since the early partial redemption of RM3.7 million in December 2011.

ASRB is a bankruptcy remote special purpose vehicle incorporated solely to finance the acquisition of eligible consumer financing receivables originated by Koperasi Shamelin Berhad (KSB), a company established under the Co-operative Societies Act 1993. The affirmed rating reflects the sufficient level of credit enhancement currently available to support the AA+ rating on the notes, as provided by a cash balance of RM4.47 million and outstanding principal of non-defaulted consumer loans of RM0.19 million. The maintained negative outlook on the rating reflects the continuing lack of certainty surrounding ASRB’s ultimate tax liabilities. The collateral pool for Notes Series-A comprises consumer receivables amounting to RM25.0 million at transaction close, collectively known as Portfolio-A, from mainly civil servants.

As at the reporting date of March 31, 2013, Portfolio-A’s outstanding principal balance stood at RM0.87 million, comprising 263 consumer loans with an average size of RM3,289 and average term to maturity of 48 months. After 72 months of performance, the transaction holds RM678,678 of defaulted loans, compared to RM664,016 at the time of the last rating action in September 2012 while the cumulative default rate remains within MARC’s expectations. The prepayment rate continues to be high at 51.40%.

The company has yet to file its tax returns since its inception in 2007. MARC notes that per the computation provided by ASRB’s tax agent for the period from 2007 to 2010, the company had only incurred a liability for corporate tax of RM148,657 for 2008 as ASRB had incurred losses in 2007, 2009 and 2010. Tax returns from 2011 onwards have yet to be estimated, as is the case for tax penalties. Returning the outlook to stable will be contingent on greater clarity on ASRB’s potential tax liabilities.

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