MARC Ratings has affirmed its rating of AAA_IS on Cagamas MBS Berhad’s RM2,110.0 million asset-backed Sukuk Musyarakah issuance (CMBS 2007-1-i) with a stable outlook. 

The rating reflects CMBS 2007-1-i’s fully cash-backed position. CMBS 2007-1-i has a strong liquidity position, with cash and cash equivalents of RM444.8 million as of the November 29, 2023 reporting date. This is more than sufficient to cover the remaining RM44.4 million profit payment and RM290.0 million principal repayment on CMBS 2007-1-i’s final Tranche 7, which is due on May 28, 2027. 

Cagamas MBS was established to undertake the securitisation of government staff Islamic home financing (GSIHF). CMBS 2007-1-i is backed by a pool of GSIHF, or Portfolio 2007-1-i. Direct monthly salary/pension deductions form the source of repayment for CMBS 2007-1-i. 

The collateral pool continues to perform well. Credit enhancement for CMBS 2007-1-i stood at a high 336.1%, partly due to the portfolio’s better-than-expected loss performance. The portfolio shows a strong performance history, with a very low cumulative default rate (CDR) of 0.10% (as a percentage of the initial pool balance), well below the initial projection. 

Subject to the portfolio meeting certain conditions, the transaction allows for prepayments of the last two tranches in reverse order. While liquidity is ample with cash balances of RM444.8 million, the company is unable to early redeem the final Tranche 7 given lower prepayment levels in the GSIHF pool than initially expected (amounts from excess prepayments were thus lower than the original estimate). Furthermore, the outstanding balance for CMBS 2007-1-i was RM532.5 million, or approximately 21.0% of its original pool balance; this has not met the required 10% threshold for prepayment.  

The rating is already at the highest level on MARC Ratings’ rating scale. The stable outlook reflects the fully cash-collateralised position of CMBS 2007-1-i, which is expected to be sustained up to the maturity date of May 28, 2027.