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. 

The rating reflects CMBS 2005-2’s fully cash-backed position. CMBS 2005-2 has a solid liquidity position, with cash and cash equivalents of RM1.07 billion as of the December 12, 2023 reporting date. This is more than sufficient to cover the remaining RM31.3 million coupon payment and RM265.0 million principal repayment on CMBS 2005-2’s final Tranche 7, which is due on December 12, 2025. 

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

The collateral pool continues to perform well. Credit enhancement for CMBS 2005-2 stood at a high 530.1%, partly due to the portfolio’s better-than-expected loss performance. The portfolio shows a strong performance history, with a very low cumulative default rate (CDR) of 0.08% (as a percentage of the initial pool balance), well below the initial projection. 

Subject to the portfolio meeting certain conditions, the transaction allows for prepayments of the last two tranches in reverse order. While liquidity is ample with cash balances of over RM1.0 billion, the company is unable to early redeem the final Tranche 7 given lower prepayment levels in the GSHL pool than initially expected (amounts from excess prepayments were thus lower than the original estimate). Nevertheless, the outstanding balance for CMBS 2005-2 was RM335.5 million, or approximately 11.6% of its original pool balance; this has not met the required 10% threshold for prepayment.  

The rating is already at the highest level on MARC Ratings’ rating scale. The stable outlook reflects the fully cash-collateralised position of CMBS 2005-2, which is expected to be sustained up to the maturity date of December 12, 2025.