MARC has affirmed the long-term ratings of Ambang Sentosa Sdn. Bhd.’s (ASSB) RM372 million and RM226 million of class B and class C Al-Bai Bithaman Ajil Islamic debt (BaIDS) asset-backed securities (ABS) facility. The affirmations are premised on the increase in percentage of class A and B assets post closing, effectively mitigating credit risk; satisfactory construction progress resulting in more than sufficient cash inflows from progress billings to meet the outstanding BaIDS; the overall resilience of projected cash flow in the event of rollover in progress billings; and additional credit and liquidity support provided by the cash reserve in EA 2.

ASSB is a special purpose, bankruptcy-remote company incorporated in Malaysia for the purpose of purchasing from the originator, Maxisegar Sdn. Bhd. (MSB), the latter’s rights, title and interest in the balance of receivables under a selected pool of Sale and Purchase Agreements (SPAs) entered into between the originator and end-purchasers. The SPAs are in respect of the sale of residential and commercial units developed by MSB in Taman Puncak Jalil (residential: 99.0%; commercial: 1.0%) and Saujana Damansara (residential: 88.0%; commercial: 12.0%).

Purchase of receivables was funded via the issuance of the BaIDS by ASSB. The BaIDS are backed by secured sales (i.e. assets) of not less than RM1,760.6 million, expressed in terms of assigned value, from the two projects, representing overall security coverage of more than one and a half times. For the purpose of the securitisation transaction, the assets have been divided into three classes, based upon the status of end-financing facilities, if any, obtained by end-purchasers to settle the balance of the unit purchase price, on closing of the transaction. Class A and class B assets are those where end-financing have been secured. Credit risk is substantially mitigated as end-financing facilities are required to be secured in respect of at least 95% of the initial asset pool at the expiry of six months from the close of the transaction. As at 31 July 2004, approximately 98.2% of the securitised pool comprised of class A (79.2%) and class B assets (19.0%).

Construction progress has been satisfactory with overall completion, in terms of progress billings, in excess of 50% for Taman Puncak Jalil and approximately 85% for Saujana Damansara. As such, receipts from progress billings during the first year post issuance have been more than sufficient to cover the RM401.58 million class A BaIDS (primary and secondary), leaving a balance of approximately RM10.22 million in the BaIDS redemption account. MSB’s performance obligation under the respective SPAs is secured by a placement of cash deposit in an escrow account (EA1) equivalent to 105% of the initial balance development cost.

The transaction benefits from the natural payment subordination of class A, class B and class C notes. Post redemption of class A BaIDS in July 2004, credit support for class B notes is provided by the payment subordination of RM226.0 million of class C notes. Cash reserve in EA 2 amounting to RM25.97 million provides additional credit and liquidity support to cover for potential defaults as well as shortfall in the BaIDS redemption account in the event of delays in construction.