MARC has downgraded the long-term rating of CapOne Berhad’s (CapOne) secured RM600 million Super Senior Class A-1 bonds to D from AA+. At the same time, the C ratings on the RM250 million Senior Class A-2, RM50 million Mezzanine Class B and the RM100 million subordinated bonds have also been downgraded to D. CapOne, a bankruptcy remote special purpose company, was established to implement the primary collateralised loan obligation programme.

The downgrade of the rating on the Super Senior Class A-1 bonds reflects the failure to make full payment of outstanding principal on its maturity date of September 20, 2010.  MARC received confirmation from the facility agent and the servicer that partial repayment of RM421.85 million was made to the senior bondholders representing 70.3% of the outstanding principal on the class’ bond amount. Meanwhile, the downgrade of the ratings on the Senior Class A-2, Mezzanine and subordinated bonds reflects non-payment of principal on the maturity date.

On September 20, 2010, only 10 of 25 obligors comprising the pool repaid their outstanding principal in full while two obligors made partial principal repayment. There have been no recoveries to date in respect of the earlier defaulted loans, however, some recoveries are expected from certain newly defaulted loans.  Aside from the interest and principal repayment received, the total amount available for the redemption of the bonds includes, among others, RM35.96 million of funds in the reserve account, and is net of senior bond expenses and coupon payments for the secured classes.

Following the rating downgrade to D, MARC no longer has a surveillance obligation on the bonds.

Contacts:
Nadia Edmaz Abdul Hadi, 03-2090 2262/ nadia@marc.com.my;
Sandeep Bhattacharya, 03-2090 2247/ sandeep@marc.com.my.