Friday, Feb 28, 2003
MARC has assigned long-term ratings of AAA (triple A) to Auto ABS One Berhad’s RM510 million redeemable asset-backed bonds, consisting of RM190 million nominal value Class A(1); RM195 million nominal value Class A(2) and RM125 million nominal value Class A(3).
Under the first tier of a two-tiered sale structure, Bumiputra-Commerce Finance Bhd (BCF), the primary seller, will sell RM545 million principal value and related interest charges of hire purchase receivables to a wholly-owned subsidiary, I-Prestige Sdn Bhd, the originator. The transfer of the receivables will be effected by way of an equitable assignment of the assets to the originator. BCF will continue to act as the servicer of the receivables under this transaction.
I-Prestige will then sell an undivided share in the principal portion of the hire purchase receivables to the issuer, Auto ABS One Bhd (Auto ABS); a bankruptcy-remote special purpose company, wholly owned under trust for the benefit of certain charities; under the second tier. Funding for the purchase will be by way of an issue by Auto ABS of up to RM510 million in nominal value of rated Class A bonds. Besides the remittance of principal collections, the originator will also make semi-annual payments to the issuer as compensation for the retention of the interest portion of the hire purchase receivables. The two-tiered sale structure is to meet the objectives of insulating the receivables from the effects of insolvency of the primary seller as well as achieving the non-consolidation of the issuer with the primary seller’s assets.
Slightly over three-quarters of BCF’s current hire purchase portfolio comprises used vehicle financing. The bulk of the portfolio was originated within Selangor and Johor and over half of the underlying vehicles are of various Proton makes. Only seasoned receivables (minimum six months) with good payment track record, as defined under the eligibility criteria, are selected for the pool, to reduce the frequency of defaults within the pool. A two-year revolving period has also been incorporated into the transaction structure, enabling the originator to purchase additional eligible hire purchase receivables from the primary seller during the said period.
Credit enhancement is provided by the overcollaterization of 107% (that is, RM545 million worth of receivables backing RM510 million of bonds) and a non-amortizing cash reserve equivalent to 2.5% of the nominal value of the bonds. The RM35 million overcollaterization will reside in the originator’s accounts as a deferred consideration in favour of the primary seller. A non-amortizing cash reserve account, fully funded on closing by the originator, will be utilized to cover any shortfall in funding for the purpose of the payment and repayment of compensation and principal respectively. The sizing of the credit support level was based upon MARC’s analysis of the default, delinquency and prepayment statistics of 69 static pools provided by BCF, covering the period January 1996 to September 2001. A loss multiple of four times was applied to the base case default rate in the cash flow projection; consistent with a AAA-stressed scenario.
Principal collections (including prepayments) from the pool of receivables in the post-revolving period will be applied towards the sequential repayment of the tranches on a semi-annual basis. This repayment programme will be effected based upon available funds from collections. The full repayment of any outstanding principal sums will nevertheless have to be made on the legal final maturity date of the respective tranches.
Under the first tier of a two-tiered sale structure, Bumiputra-Commerce Finance Bhd (BCF), the primary seller, will sell RM545 million principal value and related interest charges of hire purchase receivables to a wholly-owned subsidiary, I-Prestige Sdn Bhd, the originator. The transfer of the receivables will be effected by way of an equitable assignment of the assets to the originator. BCF will continue to act as the servicer of the receivables under this transaction.
I-Prestige will then sell an undivided share in the principal portion of the hire purchase receivables to the issuer, Auto ABS One Bhd (Auto ABS); a bankruptcy-remote special purpose company, wholly owned under trust for the benefit of certain charities; under the second tier. Funding for the purchase will be by way of an issue by Auto ABS of up to RM510 million in nominal value of rated Class A bonds. Besides the remittance of principal collections, the originator will also make semi-annual payments to the issuer as compensation for the retention of the interest portion of the hire purchase receivables. The two-tiered sale structure is to meet the objectives of insulating the receivables from the effects of insolvency of the primary seller as well as achieving the non-consolidation of the issuer with the primary seller’s assets.
Slightly over three-quarters of BCF’s current hire purchase portfolio comprises used vehicle financing. The bulk of the portfolio was originated within Selangor and Johor and over half of the underlying vehicles are of various Proton makes. Only seasoned receivables (minimum six months) with good payment track record, as defined under the eligibility criteria, are selected for the pool, to reduce the frequency of defaults within the pool. A two-year revolving period has also been incorporated into the transaction structure, enabling the originator to purchase additional eligible hire purchase receivables from the primary seller during the said period.
Credit enhancement is provided by the overcollaterization of 107% (that is, RM545 million worth of receivables backing RM510 million of bonds) and a non-amortizing cash reserve equivalent to 2.5% of the nominal value of the bonds. The RM35 million overcollaterization will reside in the originator’s accounts as a deferred consideration in favour of the primary seller. A non-amortizing cash reserve account, fully funded on closing by the originator, will be utilized to cover any shortfall in funding for the purpose of the payment and repayment of compensation and principal respectively. The sizing of the credit support level was based upon MARC’s analysis of the default, delinquency and prepayment statistics of 69 static pools provided by BCF, covering the period January 1996 to September 2001. A loss multiple of four times was applied to the base case default rate in the cash flow projection; consistent with a AAA-stressed scenario.
Principal collections (including prepayments) from the pool of receivables in the post-revolving period will be applied towards the sequential repayment of the tranches on a semi-annual basis. This repayment programme will be effected based upon available funds from collections. The full repayment of any outstanding principal sums will nevertheless have to be made on the legal final maturity date of the respective tranches.