Tuesday, Nov 22, 2005
MARC has assigned indicative rating of AAA to Cagamas MBS Berhad’s (Cagamas MBS) RM[2,060.0] million secured fixed-rate serial bonds. The rating is based on the stringent core and portfolio eligibility criteria, aimed at partially mitigating risk of delinquencies and defaults further reinforced by representations and warranties provided by the Federal Government of Malaysia (GOM); deductions of mortgage payments at source; adequate MRTA coverage on all government staff housing loans (GSHLs) in securitised portfolio; overcollateralisation of [140.7]%; and, the ability of the projected cashflow to withstand AAA default and prepayment stresses.
Cagamas MBS is a limited purpose entity and a wholly-owned subsidiary of Cagamas Berhad (Cagamas), established with principal activities restricted to acquiring government staff housing loans as well as Islamic home financing facilities from the GOM, and issuing asset-backed securities or any other forms of securities for the purpose of acquiring the housing loans/home financing thereof.
The proposed issuance of RM[2,060.0] million Nominal Value of Fixed Rate Serial Bonds (CMBS 2005-2) represents the third securities issuance by Cagamas MBS; the purpose of which is to acquire rights, title, interest and benefit in, to, under and in respect of selected GSHLs including all charges, guarantees and insurances by way of an equitable assignment. The portfolio of GSHLs (Portfolio 2005-2) amounting to RM[2,898.7] million comprises of mortgages of mainly public sector employees as well as pensioners. The GOM’s Housing Loans Division or Bahagian Pinjaman Perumahan (BPP) is the servicer of the securitised pool of GSHLs. The proposed CMBS 2005-2 comprises of seven tranches with maturities on the third, fifth, seventh, tenth, twelfth, fifteenth and twentieth anniversary from the issuance date. Similar to the previous transaction, the purchase will be undertaken retrospectively, whereby the pool of GSHLs is acquired based on portfolio valuation as at the purchase date.
Credit enhancement is provided by the overcollateralisation of [140.7]% as Portfolio 2005-2 is sold to Cagamas MBS at a [28.9]% discount. From the analysis of the five static pools comprising home financing originated from 1996 to 2000, the mortgages are evidently exposed to technical delinquencies of up to six months primarily due to operational matters in administration of GSHL accounts. Therefore, for purpose of collateral analysis, GSHLs are categorised as defaulted once it is outstanding for more than nine months. The sizing of the proposed bonds is based upon analysis of the default, prepayment and recovery statistics of the five static pools.
The transaction benefits from strict portfolio eligibility criteria including, amongst others, residential properties under the GSHL must have certificate of fitness of occupation; the amount of financing under the GSHL has been fully disbursed; the GSHL must have been created more than six months prior to the purchase date; and, the GSHL must not be a defaulted account as at the purchase date. In the event of a breach of the representations in relation to the portfolio eligibility criteria, the originator will undertake to compensate Cagamas MBS in the form of equivalent amount or another GSHL acceptable to Cagamas MBS.
The transaction is a conditional reverse-pay structure with a limited pass-through feature which allows surplus cashflow to be paid to firstly, the outstanding Tranche 7 until its full redemption and then to Tranche 6, should the cash balance exceed RM90.0 million after the respective scheduled principal repayments on tranches one, two, three, four and five. The RM90.0 million to be retained in the cashflow before the pass-through of prepayment is triggered, provides adequate liquidity buffer to allow timely interest payments and redemption of the intermediate tranches.
Cagamas MBS is a limited purpose entity and a wholly-owned subsidiary of Cagamas Berhad (Cagamas), established with principal activities restricted to acquiring government staff housing loans as well as Islamic home financing facilities from the GOM, and issuing asset-backed securities or any other forms of securities for the purpose of acquiring the housing loans/home financing thereof.
The proposed issuance of RM[2,060.0] million Nominal Value of Fixed Rate Serial Bonds (CMBS 2005-2) represents the third securities issuance by Cagamas MBS; the purpose of which is to acquire rights, title, interest and benefit in, to, under and in respect of selected GSHLs including all charges, guarantees and insurances by way of an equitable assignment. The portfolio of GSHLs (Portfolio 2005-2) amounting to RM[2,898.7] million comprises of mortgages of mainly public sector employees as well as pensioners. The GOM’s Housing Loans Division or Bahagian Pinjaman Perumahan (BPP) is the servicer of the securitised pool of GSHLs. The proposed CMBS 2005-2 comprises of seven tranches with maturities on the third, fifth, seventh, tenth, twelfth, fifteenth and twentieth anniversary from the issuance date. Similar to the previous transaction, the purchase will be undertaken retrospectively, whereby the pool of GSHLs is acquired based on portfolio valuation as at the purchase date.
Credit enhancement is provided by the overcollateralisation of [140.7]% as Portfolio 2005-2 is sold to Cagamas MBS at a [28.9]% discount. From the analysis of the five static pools comprising home financing originated from 1996 to 2000, the mortgages are evidently exposed to technical delinquencies of up to six months primarily due to operational matters in administration of GSHL accounts. Therefore, for purpose of collateral analysis, GSHLs are categorised as defaulted once it is outstanding for more than nine months. The sizing of the proposed bonds is based upon analysis of the default, prepayment and recovery statistics of the five static pools.
The transaction benefits from strict portfolio eligibility criteria including, amongst others, residential properties under the GSHL must have certificate of fitness of occupation; the amount of financing under the GSHL has been fully disbursed; the GSHL must have been created more than six months prior to the purchase date; and, the GSHL must not be a defaulted account as at the purchase date. In the event of a breach of the representations in relation to the portfolio eligibility criteria, the originator will undertake to compensate Cagamas MBS in the form of equivalent amount or another GSHL acceptable to Cagamas MBS.
The transaction is a conditional reverse-pay structure with a limited pass-through feature which allows surplus cashflow to be paid to firstly, the outstanding Tranche 7 until its full redemption and then to Tranche 6, should the cash balance exceed RM90.0 million after the respective scheduled principal repayments on tranches one, two, three, four and five. The RM90.0 million to be retained in the cashflow before the pass-through of prepayment is triggered, provides adequate liquidity buffer to allow timely interest payments and redemption of the intermediate tranches.