CREDIT ANALYSIS REPORT

Class Auto Receivables Bhd - 2012

Report ID 4278 Popularity 1668 views 33 downloads 
Report Date Aug 2012 Product  
Company / Issuer Class Auto Receivables Bhd Sector Hire Purchase Receivables
Price (RM)
Normal: RM500.00        
  Add to Cart
Rationale

MARC has affirmed its AAA ratings on Class Auto Receivables Berhad’s (Class Auto) Class B and Class C Notes with a stable outlook. The rating affirmation affects RM7.75 million of outstanding Class B Notes and RM20.0 million of outstanding Class C Notes. At the same time, MARC has withdrawn its AAA rating on the Class A Notes following the redemption of all remaining outstanding Class A Notes. The three classes of notes (collectively known as Note Series 2007-A) represent the first and only series of auto hire purchase receivables-backed notes issued under Class Auto’s RM10.0 billion Medium Term Notes (MTN) Programme to date. The affirmed ratings reflect increased credit enhancement levels for the notes, attributable to the collateral pool’s strong performance. 

Class Auto is a bankruptcy-remote special purpose vehicle incorporated for the purpose of securitising auto hire purchase receivables originated by CIMB Bank Berhad (CIMB Bank) on behalf of Proton Commerce Sdn Bhd (PCSB). PCSB, an automotive finance intermediary, is the beneficial owner of Portfolio 2007-A, a pool of auto hire purchase receivables with a total principal value of approximately RM500 million, which was acquired at transaction close by Class Auto.

At transaction close, Portfolio 2007-A comprised hire purchase receivables of new Proton cars, with a minimum seasoning of three months and maximum loan-to-value ratios of 90%. Monthly collections from Portfolio 2007-A are allocated for the servicing of the coupon and principal payments for the rated notes. The one-day commingling risk associated with the servicer’s transfer of collections from Portfolio 2007-A to the series collection account on the day following collection is mitigated by CIMB Bank’s strong credit standing (rated AAA/MARC-1/Stable).

As of May 31, 2012, credit enhancement levels for the outstanding Class B and Class C Notes registered at 519.3% and 293.5% respectively (initial rating: 120.5% and 114.9%) supported by RM119.95 million in hire purchase receivables and a RM19.77 million Collection Account balance. Portfolio 2007-A has performed above expectations, reflected by its low cumulative default of 1.55% as of May 31, 2012 against MARC’s base case default assumption 3.63% for the corresponding period. Meanwhile, the transaction’s cumulative prepayment rate of 16.81% remained within MARC’s base case prepayment assumption of 33.60%.

Over the past year, Class Auto fully redeemed its Class A Notes and made early redemptions up to RM12.25 million of Class B Notes, mitigating the high observed prepayment experience. MARC’s cash flow analysis has shown that the remaining notes can be adequately serviced under the AAA high-stress default scenario.

MARC’s stable outlook for Portfolio 2007-A is premised on the expectation that the collateral pool defaults will remain within base-case expectations amid moderating domestic economic growth over the next 12 to 18 months. MARC’s asset and cash flow analyses lead the rating agency to conclude that available credit enhancement will adequately support the AAA ratings for the remaining two classes of notes.

Major Rating Factors

Strengths

  • High credit enhancement levels offer substantial credit protection for the notes;
  • Satisfactory performance of the securitised portfolio reflected by low cumulative default rates;
  • Availability of excess spread; and
  • Protective features within the transaction’s structure.

Challenges/Risks

  • Exposure to a sharp deterioration in the collateral pool’s performance.
Related