CREDIT ANALYSIS REPORT

Kerisma Bhd - 2009 Credit Commentary Report

Report ID 3243 Popularity 1466 views 136 downloads 
Report Date May 2009 Product  
Company / Issuer Kerisma Bhd Sector Primary CLO
Price (RM)
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Rationale

MARC has downgraded the long-term ratings of Kerisma Berhad’s (Kerisma) RM870.0 million senior secured bonds and RM30.0 million mezzanine bonds from BBB to B and from BB- to C respectively, and affirmed the RM100.0 million subordinated bonds at C. The ratings remain on MARCWatch Negative. The rating actions reflect reduced likelihood of full principal payments to both classes of bonds on the legal final maturity on June 3, 2009 arising from potential rescheduling of repayment dates of three underlying loans involving RM127.0 million of principal outstanding in total. Credit enhancements to the senior secured bonds and mezzanine bonds, meanwhile, indicate both classes can only withstand further losses of up to approximately RM45.0 million and RM15.0 million respectively. The three obligors which have submitted loan rescheduling proposals to Kerisma’s bondholders are seeking to extend their loan maturities beyond the legal final maturity date of the senior and mezzanine bonds.

As at to date (excluding three defaulted obligors), the bonds are backed by RM870.0 million loans from 22 obligors and liquidity reserve of RM44.9 million. Credit enhancement levels of the senior and mezzanine bonds currently stands at 5.1% and 1.6% respectively. To date, there have been no recoveries of defaulted loans and MARC does not anticipate recoveries prior to the final redemption of the bonds. The loan rescheduling proposals of the three obligors will be tabled at an extraordinary general meeting to be held on May 29, 2009. MARC has downgraded two of the three obligors with a total loan exposure of RM77 million to BB from BBB- to reflect heightened risk of non-timely payment on June 1, 2009, the scheduled maturity date of all underlying loans. The third obligor rated BB+ has recently requested for an extension to its principal repayment of RM50.0 million.

Kerisma is a bankruptcy remote special-purpose company, established for the purpose of implementing and carrying out the primary CLO programme. At closing of the transaction in June 2004, the originator, Alliance Investment Bank Bhd, transferred its rights, title and interests in a pre-identified RM1,000.0 million static portfolio of corporate loans to Kerisma. The transaction is structured as a true sale of newly-originated corporate loans portfolio from the originator. The proceeds from the issuance of the bonds were utilised to fund the purchase of the portfolio.

MARC will continue to closely monitor and review this transaction for further rating adjustments.

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