Wednesday, Aug 24, 2005
MARC has affirmed the ratings of AAA, AA and BB to Kerisma Bhd’s (Kerisma) RM870.0 million senior 5-year secured fixed-rate, RM30.0 million mezzanine 5-year secured fixed-rate and RM100.0 million 5-year subordinated secured variable-rate asset-backed bonds. The ratings are based on improved total credit enhancement levels for the senior and mezzanine bonds respectively, the A- weighted average rating of the underlying corporate loans portfolio, the performance tests in place to divert cash flow upon occurrence of trigger events the establishment of a non-amortizing liquidity reserve equivalent to half coupon of the senior and mezzanine bonds that will be partially pre-funded and partially build-up from the excess spread.
Kerisma is a bankruptcy remote special-purpose company incorporated in Malaysia, established for the purpose of implementing and carrying out this primary collateralized loan obligation (CLO) programme. At closing of the transaction, the originator - Alliance Merchant Bank Bhd (Alliance Merchant) transfered its rights, title and interest in a pre-identified RM1,000.0 million static portfolio of corporate loans to Kerisma. The transaction is structured as a true sale of the newly-originated corporate loans portfolio from the originator; adhering to the structure under a primary CLO transaction. The proceeds from the issuance of the bonds were utilised to fund the purchase of the portfolio.
The underlying portfolio of corporate loans consists of 25 individual obligors from 16 different industry categories with a weighted average rating of A-. The highest industry concentration comes from the construction and engineering category and represents 17.0% of the total portfolio.
Since closing of the transaction, the rating migration of the securitised portfolio is rather stable with only one obligor experienced single-notch migration. Specifically, one obligor within the BBB rating band was downgraded whilst the ratings for obligors rated A- and above remain unchanged. With the fairly stable credit standings depicted by the overall loan pools, the weighted average rating factor only deteriorated marginally from 7.6 to 7.9 while the rating distribution remains stable with 66.0% of the portfolio is exposed to obligors rated A- and above.
For the period under review, Kerisma managed to adhere to the performance tests under this CLO programme, namely the Overcollateralization Test (OC) and Interest Coverage Test (IC). As at June 2005, Kerisma posted overcollateralization ratios of 114.9% and 111.1% respectively for the senior and mezzanine bonds, well above the covenanted level of 105.0% and 104.0% respectively. In addition, Kerisma’s interest coverage ratio was reported at 168.5% against the minimum required ratio of 120%. As additional credit enhancement to the bondholders (besides the OC and IC tests), RM13.0 million was deposited into a Liquidity Reserve Account, acting as liquidity buffer to meet potential shortfall in the coupon payments for senior and mezzanine bonds.
Kerisma is a bankruptcy remote special-purpose company incorporated in Malaysia, established for the purpose of implementing and carrying out this primary collateralized loan obligation (CLO) programme. At closing of the transaction, the originator - Alliance Merchant Bank Bhd (Alliance Merchant) transfered its rights, title and interest in a pre-identified RM1,000.0 million static portfolio of corporate loans to Kerisma. The transaction is structured as a true sale of the newly-originated corporate loans portfolio from the originator; adhering to the structure under a primary CLO transaction. The proceeds from the issuance of the bonds were utilised to fund the purchase of the portfolio.
The underlying portfolio of corporate loans consists of 25 individual obligors from 16 different industry categories with a weighted average rating of A-. The highest industry concentration comes from the construction and engineering category and represents 17.0% of the total portfolio.
Since closing of the transaction, the rating migration of the securitised portfolio is rather stable with only one obligor experienced single-notch migration. Specifically, one obligor within the BBB rating band was downgraded whilst the ratings for obligors rated A- and above remain unchanged. With the fairly stable credit standings depicted by the overall loan pools, the weighted average rating factor only deteriorated marginally from 7.6 to 7.9 while the rating distribution remains stable with 66.0% of the portfolio is exposed to obligors rated A- and above.
For the period under review, Kerisma managed to adhere to the performance tests under this CLO programme, namely the Overcollateralization Test (OC) and Interest Coverage Test (IC). As at June 2005, Kerisma posted overcollateralization ratios of 114.9% and 111.1% respectively for the senior and mezzanine bonds, well above the covenanted level of 105.0% and 104.0% respectively. In addition, Kerisma’s interest coverage ratio was reported at 168.5% against the minimum required ratio of 120%. As additional credit enhancement to the bondholders (besides the OC and IC tests), RM13.0 million was deposited into a Liquidity Reserve Account, acting as liquidity buffer to meet potential shortfall in the coupon payments for senior and mezzanine bonds.