CREDIT ANALYSIS REPORT

CAGAMAS MBS BERHAD (CMBS 2005-2) - 2022

Report ID 605389003795 Popularity 652 views 59 downloads 
Report Date Mar 2022 Product  
Company / Issuer Cagamas MBS Bhd Sector Residential Mortgages
Price (RM)
Normal: RM500.00        
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Rationale
Rating action     
MARC Ratings has affirmed its rating of AAA on Cagamas MBS Berhad’s (Cagamas MBS) RM2,060.0 million asset-backed fixed rate serial bonds (CMBS 2005-2) with a stable outlook. 

Rationale     
The rating incorporates CMBS 2005-2’s very high accumulated cash and permitted investments of RM769.1 million as at the reporting date of December 13, 2021, that is more than sufficient to cover the outstanding principal balance of RM265.0 million as well as its remaining coupon obligations of about RM62.9 million under tranche 7. The final redemption is due on December 12, 2025. 

Cagamas MBS was established to undertake the securitisation of conventional and Islamic home financing originated by the Malaysian government. CMBS 2005-2 is backed by a pool of government staff housing loans (GSHL), or Portfolio 2005-2. Direct monthly salary/pension deductions form the source of repayment for CMBS 2005-2.

The collateral pool performance of CMBS 2005-2 has remained strong as reflected by the high credit enhancement level of 505.5% as at the reporting date of December 13, 2021, supported by the portfolio’s historically low cumulative default rate (CDR) of 0.20% of the initial pool balance. The CDR is well below MARC Ratings’ revised projection of 2.79%. GSHL defaults, classified as accounts in arrears for more than nine months, were mainly due to pending assessment on the status of borrower accounts as well as pending claims on mortgage reducing term assurance (MRTA). 

The pool’s transaction terms allow for prepayments of the last two tranches upon meeting certain conditions; this option has not been exercised as the conditions have not been met. In particular, cash flow arising from the excess prepayments remained short of the projected amounts while the outstanding principal of about 19.9% of the initial principal outstanding during the current review period is higher than the threshold of 10% that is required to allow for prepayment.

Rating outlook/trajectory     
The stable outlook reflects the fully cash-collateralised position of CMBS 2005-2, among other key factors; the outlook is not expected to change over the redemption period.

 Key strengths
  • Very healthy accumulated cash balances in the designated accounts sufficient to cover the remaining principal balance and interest payments
  • Strong credit enhancement supported by high collateralisation


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