View Credit Analysis Report (6053629)

SubcategoryStructured Finance
Date Article2021-03-26 00:00:00
TitleCAGAMAS MBS BERHAD (CMBS 2007-1-i) - 2021
Rating action

MARC has affirmed its AAAIS rating on Cagamas MBS Berhad’s RM2,110.0 million asset-backed Sukuk Musyarakah issuance (CMBS 2007-1-i) with a stable outlook.


The affirmed rating reflects CMBS 2007-1-i’s strong credit enhancement level of 203.2% as at October 31, 2020 (Quarter 55) based on an outstanding principal of non-defaulted home financing of RM851.7 million and combined cash and permitted investments of RM387.5 million. The sukuk programme currently has an outstanding amount of RM610.0 million.

Cagamas MBS is a wholly-owned special purpose vehicle of Cagamas Holdings Berhad and was established to undertake the securitisation of conventional and Islamic home financing originated by the Malaysian government. CMBS 2007-1-i is backed by a pool of government staff Islamic home financing (GSIHF), or Portfolio 2007-1-i. Direct monthly salary/pension deductions form the source of repayment for CMBS 2007-1-I, minimising repayment risk.

The collateral pool performance for CMBS 2007-1-i remains strong, supported by the portfolio’s historically low cumulative default rates (CDR) of the initial pool balance. As at end-October 2020, the CDR stood at 0.29%, well below MARC’s revised projection of 1.67%. GSIHF defaults, classified as accounts in arrears for more than nine months, were mainly attributed to pending assessment on the status of borrower accounts as well as pending claims on mortgage reducing term takaful (MRTT). 

The cumulative prepayment rate on Portfolio 2007-1-i stood at 14.50% as at Quarter 55, with the average quarterly prepayment rate remaining stable at 0.26% (Quarter 51: 0.27%). Risk of negative carry arising from higher-than-expected prepayments is addressed by the conditional pass-through mechanism that allows for early redemption of the sukuk in reverse order with the last tranche being paid first. CMBS 2007-1-i’s has a strong liquidity buffer; as at end-October 2020, its combined cash and permitted investment of RM387.5 million is adequate to meet its next redemption of RM320.0 million which is due on May 27, 2022.

Rating outlook

The stable outlook is premised on our expectations of continued stable collateral performance and a sustained high credit enhancement level that remains supportive of the rating.

Rating trajectory

Downside scenario

Downward rating pressure is very minimal given the more than sufficient outstanding principal balance of non-defaulted mortgages and accumulated cash balances to meet principal and profit payments.

Key strengths
Strong credit enhancement supported by high overcollateralisation
Satisfactory performance of collateral pool

Key risk
Risk of negative carry from higher-than-expected prepayments

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