Prima Uno Bhd - 2008

MARC has affirmed Prima Uno Berhad’s (Prima Uno) AAA-rated RM290.0 million Super Senior A, AAA-rated RM335.0 million Super Senior B, AAA-rated RM190.0 million Senior and AA-rated RM40.0 million Mezzanine secured bonds as well as BB-rated RM95.0 million subordinated secured bonds. The affirmed ratings reflect the satisfactory performance of the collateral pool as indicated by stable portfolio performance measures such as performance test ratios and weighted average rating factor (WARF) and credit enhancement levels of 221.7%, 49.3%, 14.5% and 9.1% for the Super Senior A, Super Senior B, Senior and Mezzanine bonds, respectively, which remain consistent with the initial ratings.

Prima Uno is a bankruptcy remote special-purpose company incorporated in Malaysia, established for the purpose of implementing and carrying out this primary CLO programme. Upon closing, RHB Investment Bank Berhad, the originator, transferred its rights, title and interest in, to and under a pre-identified RM950.0 million static portfolio of corporate loans to Prima Uno. The transaction has been structured as a true sale of a newly-originated corporate loans portfolio by the originator. The purchase of corporate loans was funded by proceeds from the issuance of the secured bonds.

The collateral pool consists of 32 five-year non-amortizing interest-only loans with single bullet repayment to obligors from 14 industry sectors. During the current review, the loan portfolio experienced one upgrade due to robust income growth and improved financial position and five downgrades attributable to deteriorating financial performance and/or increased business risk profile due to diversification away from core businesses. One obligor rating was downgraded to D following a cross default triggered by payment default on its other debt obligation. The defaulted obligor belongs to the automotive industry. Following the rating migration, the underlying portfolio’s WARF deteriorated to 8.14 from 7.87, which corresponds to a weighted average rating of A-/BBB+ from A- initially. As of March 2008, portfolio composition of obligors rated A- and above accounted for 70.7% of the total portfolio (January 2007: 70.5%). MARC ran a series of stress tests to assess the ability of the rated bonds to withstand revised default rates applied on the underlying loan portfolio based on the current WARF of 8.14. The results of the stress tests indicate that the credit enhancement levels for the Super Senior A, Super Senior B, Senior and Mezzanine bonds in the form of overcollateralization and a non-amortizing liquidity reserve, remain adequate for the revised loss numbers at the current rating level.

The transaction incorporates several performance tests, including overcollateralization and interest coverage tests, the breach of which would result in excess cash flows being redirected to early redemption of principal. As of March 2008, Prima Uno reported OC ratios of 317.2%, 147.2%, 112.9% and 107.6% for the Super Senior A, Super Senior B, Senior and Mezzanine bonds, respectively, well above the minimum required ratios.