Monday, Sep 13, 2004
MARC has assigned ratings of A/MARC-2 to RCE Premier Sdn. Bhd.’s (RCEP) RM45 million 5-year fixed rate serial bonds and up to RM50 million 7-year underwritten commercial paper facility. The ratings assigned to RCE Premier Sdn Bhd’s (RCEP) proposed Bonds and CP programme (referred to as the Facilities) reflect the 1.3 times security cover of receivables purchased by RCEP to be maintained at all times; protective issue structure; provision for substitution of defaulted receivables with performing receivables by RCE Marketing Sdn Bhd (RCEM); adequate cashflow protection during the tenure of the Facilities; and low job transfers and resignations in the public sector. These positives are, however, moderated by the historically high debt leverage position and moderate profitability of RCEM Group.
RCE Premier Sdn Bhd (RCEP), a special purpose company, is a wholly owned subsidiary of RCEM, incorporated for the purpose of purchasing eligible receivables from RCEM. Receivables comprise of scheduled repayment of consumer financing and personal loan financing disbursed to government servants who are members of Koperasi Belia Nasional Berhad (KOBENA) and Koperasi Sejati Berhad (KSB). At closing, the purchase will be funded via the issuance of the proposed Bonds and CPs with subsequent purchases post closing, to be funded by proceeds from issuance of CPs. The sale of the receivables will be by way of an absolute legal assignment of all of RCEM’s rights, title and interest in, to and under the receivables. The source of repayment of the Facilities is the monthly salary deductions of government servants under the consumer financing scheme and personal loans disbursed.
The principal activities of RCEM (previously known as Redifussion Consumer Electronics (M) Sdn. Bhd.) are provision of personal loans to members of cooperatives and that of trading in electrical home appliances and other consumer durable products mainly on hire purchase terms. RCEM is a subsidiary of RCE Capital Berhad (RCEB) via a 87.5% shareholding in the former. RCEM has maintained supply arrangements with KOBENA and KSB since 1998 and 1999.
Under the proposed transaction, the servicer function will be undertaken by RCEM with the primary responsibility of administering and monitoring collections from ANGKASA. Monies in the cooperatives’ accounts will be directly remitted to RCEP’s Master Collection Account. Historical defaults of RCEM’s receivables have been relatively low with delinquent accounts comprising only 1.86% and 1.44% of total sales in FY 2003 and FY 2002 respectively. Should defaults occur, RCEM is obliged to substitute the defaulted receivables with performing receivables.
Credit risk is sufficiently mitigated as financing is extended to government servants subject to meeting a specified set of criteria. Liquidity risk is sufficiently mitigated with the requirement to maintain at least 1.3 times security cover; maintenance of the next six months coupon of the Facilities in the DSRA, at all times; an undertaking by RCEM to top up the shortfall in SFA; and a corporate guarantee from RCEB.
Debt leverage of the RCEM group stood at 2.7 times as at 31 December 2003 with proforma debt leverage expected to fall to 2.2 times post issuance of the RM45 million Bonds. The prohibition to incur additional indebtedness other than under the proposed Facilities should ensure that RCEP’s debt leverage position, going forward, will be within acceptable levels. RCEP’s projections are fairly robust throughout the tenure of the Facilities with average and minimum debt service cover ratios (DSCR) at 3.30 times and 1.57 times respectively.
RCE Premier Sdn Bhd (RCEP), a special purpose company, is a wholly owned subsidiary of RCEM, incorporated for the purpose of purchasing eligible receivables from RCEM. Receivables comprise of scheduled repayment of consumer financing and personal loan financing disbursed to government servants who are members of Koperasi Belia Nasional Berhad (KOBENA) and Koperasi Sejati Berhad (KSB). At closing, the purchase will be funded via the issuance of the proposed Bonds and CPs with subsequent purchases post closing, to be funded by proceeds from issuance of CPs. The sale of the receivables will be by way of an absolute legal assignment of all of RCEM’s rights, title and interest in, to and under the receivables. The source of repayment of the Facilities is the monthly salary deductions of government servants under the consumer financing scheme and personal loans disbursed.
The principal activities of RCEM (previously known as Redifussion Consumer Electronics (M) Sdn. Bhd.) are provision of personal loans to members of cooperatives and that of trading in electrical home appliances and other consumer durable products mainly on hire purchase terms. RCEM is a subsidiary of RCE Capital Berhad (RCEB) via a 87.5% shareholding in the former. RCEM has maintained supply arrangements with KOBENA and KSB since 1998 and 1999.
Under the proposed transaction, the servicer function will be undertaken by RCEM with the primary responsibility of administering and monitoring collections from ANGKASA. Monies in the cooperatives’ accounts will be directly remitted to RCEP’s Master Collection Account. Historical defaults of RCEM’s receivables have been relatively low with delinquent accounts comprising only 1.86% and 1.44% of total sales in FY 2003 and FY 2002 respectively. Should defaults occur, RCEM is obliged to substitute the defaulted receivables with performing receivables.
Credit risk is sufficiently mitigated as financing is extended to government servants subject to meeting a specified set of criteria. Liquidity risk is sufficiently mitigated with the requirement to maintain at least 1.3 times security cover; maintenance of the next six months coupon of the Facilities in the DSRA, at all times; an undertaking by RCEM to top up the shortfall in SFA; and a corporate guarantee from RCEB.
Debt leverage of the RCEM group stood at 2.7 times as at 31 December 2003 with proforma debt leverage expected to fall to 2.2 times post issuance of the RM45 million Bonds. The prohibition to incur additional indebtedness other than under the proposed Facilities should ensure that RCEP’s debt leverage position, going forward, will be within acceptable levels. RCEP’s projections are fairly robust throughout the tenure of the Facilities with average and minimum debt service cover ratios (DSCR) at 3.30 times and 1.57 times respectively.