MARC has affirmed the long-term ratings of Auto ABS One Bhd’s (Auto ABS) RM510.0 million Class A bonds at AAA. This is premised on the portfolio of hire purchase receivables performing within stressed expectations, the availability of gross overcollateralization of 107.0% and a non-amortizing cash reserve equivalent to 2.5% of the nominal value of the bonds.

Under the first tier of a two-tiered sale structure, Bumiputra-Commerce Finance Bhd (BCF), the primary seller, sold RM545.0 million principal value and related interest charges of hire purchase receivables to a wholly-owned subsidiary, I-Prestige Sdn Bhd, the originator. The receivables were transferred by way of an equitable assignment of the assets to the originator. BCF continues to act as the servicer of the receivables under this transaction.

I-Prestige then sold an undivided share in the principal portion of the hire purchase receivables to the issuer, Auto ABS; a bankruptcy-remote special purpose company under the second tier. Besides the remittance of principal collections, the originator also makes semi-annual payments to the issuer as compensation for the retention of the interest portion of the hire purchase receivables.



Slightly over three-quarters of BCF’s current hire purchase portfolio comprises used vehicle financing. The bulk of the portfolio was originated within Selangor and Johor and over half of the underlying vehicles are of various Proton makes. Only receivables fulfilling the eligibility criteria are selected for the pool. A two-year revolving period (ending January 2005) has also been incorporated into the transaction structure, enabling the originator to purchase additional eligible hire purchase receivables from the primary seller during the said period.

Principal collections (including prepayments) from the pool of receivables in the post-revolving period will be applied towards the sequential repayment of the tranches on a semi-annual basis. This repayment programme will be effected based upon available funds from collections. The full repayment of any outstanding principal sums will nevertheless have to be made on the legal final maturity date of the respective tranches.

Over the period of 11 months since closing, portfolio default occurrences were well within the stressed expectations, charting a cumulative 1.7% on original balance as opposed to a stressed assumption of up to 16.9% on closing.