MARC has reaffirmed the long-term rating 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 was initially the servicer under this transaction. However, upon completion of the merger between BCF and its holding company, Bumiputra-Commerce Bank Bhd (BCB) in December 2005, BCB has taken over BCF’s role as the servicer.

I-Prestige, subsequent to the first tier sale transaction, sold an undivided share in the principal portion of the hire purchase receivables to the issuer, Auto ABS; a bankruptcy-remote special purpose company (representing the second tier of the two-tiered sale structure). 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 of 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 were selected for the pool. The two-year revolving period ended in February 2005 and to date, principal for Class A(2) and Class A(3) remains outstanding while the principal for Class A(1) was fully redeemed in February 2006.

Principal collections (including prepayments) from the pool of receivables are applied towards the repayment of the Class A(2) and Class A(3) bonds on a semi-annual basis commencing August 2006. The full repayment of any outstanding principal sums will nevertheless be made by the legal final maturity date of the respective classes. As at 31 March 2006, with portfolio and reserve balance amounting to RM343.16 million, the transaction benefits from the total overcollateralization of 107.2%.

Over the period of 34 months since closing, portfolio default occurrences were well within the stressed expectations, charting a cumulative 8.2% on original balance as opposed to a stressed assumption of up to 34.6% on closing.