Aegis One Bhd - 2004

Report ID 2128 Popularity 1406 views 9 downloads 
Report Date Nov 2004 Product  
Company / Issuer Aegis One Bhd Sector Primary CLO
Price (RM)
Normal: RM500.00        
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MARC has reaffirmed the long-term ratings of Aegis One Bhd’s (Aegis One) RM900.0 million senior secured bonds and RM100.0 million subordinated secured bonds at AAA and BB respectively. This is premised on the reaffirmation of the weighted average rating of Aegis One’s portfolio of corporate loans at A- / BBB+; comfortable overcollateralization and interest coverage ratios; the adequacy of supervision of the corporate loans by the portfolio manager and the liquidity reserve equivalent to three months interest coverage of the senior bonds.

Aegis One is a bankruptcy remote special-purpose company incorporated in Malaysia, established for the primary purpose of undertaking this primary collateralized loan obligation (CLO) programme. Upon closing in November 2002, Affin Bank Bhd (Affin Bank) as the originator transferred its rights, title and interest in, to and under a pre-identified portfolio of corporate loans to Aegis One. The transaction is structured as a true sale of the corporate loans portfolio from the originator. As this is a primary CLO, none of the corporate loans in the pre-identified portfolio were direct transfers from Affin Bank’s books.

Since transaction closing, Aegis One’s portfolio of 25 underlying securitized corporate loans with total exposure of RM1,000.0 million, experienced a total of five upgrades and three downgrades over the past two years. The rating migrations arose
from the A- and BBB+ rating categories, with all except for two obligors experiencing single-notch migrations in a year.

During the year under review, the portfolio exposure to credits rated BBB (lowest rating allowable) remained stable at four obligors representing 16.0% of total portfolio. Nevertheless, with upgrades exceeding downgrades, the portfolio’s weighted average rating improved during the year to 8.11 from 8.49 in 2003, with the proportion of credits rated A- and above representing 64.5% (2003: 53.0%) of total portfolio exposure.

Furthermore, apart from the rating movements, Aegis One also experienced a positive change in its industry concentration following the change in principal activity of an obligor from industrial to banking and finance in 2003.

As at end November 2004, Aegis One’s overcollateralization (OC) ratio remained at 111.11%, above the required minimum of 105.00%. The interest coverage (IC) ratio as of the same date increased to 169.96%, up from end November 2003’s 152.84%, and is also higher than the required minimum of 120.00%. The liquidity reserve account remained unutilized at RM11.7 million, representing a three months interest coverage on the senior bonds, as required under the terms of the transaction.