MARC has reaffirmed the long-term rating of Auto ABS One Bhd’s (Auto ABS) RM510.0 million Class A bonds at AAA. The reaffirmation reflects the portfolio of hire purchase receivables performing within MARC’s stress scenario, rising enhancement levels underpinned by the availability of overcollateralization of 151.3% (initial: 106.9%)  and a non-amortizing cash reserve equivalent to 16.6% (initial: 2.5%) of the outstanding Class A bonds (as at 1 March 2007).

Under the first tier of a two-tiered sale structure, Bumiputra-Commerce Finance Bhd (BCF), the primary seller, sold RM545.0 million principal value and related interest charges of hire purchase receivables to a wholly-owned subsidiary, I-Prestige Sdn Bhd, the originator. The receivables were transferred by way of an equitable assignment of the assets to the originator. BCF was initially the servicer under this transaction. However, upon completion of the merger between BCF and its holding company, Bumiputra-Commerce Bank Bhd (BCB) in December 2005, BCB has taken over BCF’s role as the servicer. The servicer of the transaction is now CIMB Bank following the completion of the CIMB Berhad – BCB restructuring.

I-Prestige, subsequent to the first tier sale transaction, sold an undivided share in the principal portion of the hire purchase receivables to the issuer, Auto ABS; a bankruptcy-remote special purpose company (representing the second tier of the two-tiered sale structure). Besides the remittance of principal collections, the originator also makes semi-annual payments to the issuer as compensation for the retention of the interest portion of the hire purchase receivables.

Slightly over three-quarters of BCF’s current hire purchase portfolio comprises of 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.

Principal collections (including prepayments) from the pool of receivables are applied towards the repayment of the Class A(2) and Class A(3) bonds on a semi-annual basis commencing August 2006 following the full redemption of Class A(1) bonds in February 2006. Based on the performance of the hire purchase portfolio thus far, MARC expects Class A(3) bonds to be fully redeemed ahead of its legal final maturity.

As at 1 March 2007, the outstanding principal for Class A(2) and Class A(3) stood at RM80.34 million, while the active hire purchase receivables stood at RM121.52 million. Taking into consideration the liquidity reserve account balance of RM13.3 million, Class A(2) and Class A(3) effectively benefit from a credit enhancement of approximately 168%.

Over the period of 46 months since closing, portfolio default occurrences were well within the stress scenario, charting a cumulative 8.6% against the stressed cumulative default rate of 17.6% on original balance. Arrears performance of the hire purchase receivables has been fairly stable and there appears to be some levelling off of arrears aged three months and below.