MARC has assigned ratings of AAA, AA and A+ to Class Auto Receivables Berhad’s (Class Auto) RM395.0 million Class A, RM20.0 million Class B and RM20.0 million Class C Medium-Term Notes. Class Auto, a special purpose vehicle whose shares are held by the share trustee for the benefit of certain charities, was incorporated for the purpose of purchasing hire purchase receivables from the originator, CIMB Bank Berhad (CIMB Bank) from time to time.  Under the proposed transaction, Class Auto will purchase a selected pool of hire purchase receivables (Portfolio 2007-A) with principal outstanding of no less than RM500.0 million.  The purchase has been structured as true sale by way of equitable assignment with Class Auto having beneficial interest over the receivables.  Funding the purchase will be by way of issuance of Series 2007-A, the first notes issuance under a Medium-Term Notes (MTN) Programme.  Series 2007-A comprise RM395.0 million Class A, RM20.0 million Class B, RM20.0 million Class C and RM70.0 million Owner’s Notes (collectively referred to as “the notes”). 

Portfolio 2007-A comprises of hire purchase receivables of new Proton cars only.  Receivables with minimum seasoning of three months with good payment record are selected for the pool.  In addition, Portfolio 2007-A will comprise loans with loan-to-value (LTV) of less or equal to 90% and hire purchase term of not more than 108 months.  The loans were originated by CIMB Bank for and on behalf of Proton Commerce Sdn. Bhd. (PCSB). PCSB is a 50:50 joint venture company formed by CIMB Bank and Proton Edar Sdn Bhd (PESB) in February 2004 with the objective of offering competitive financing products for new Proton car purchasers, facilitated by lower cost of funds, comprehensive infrastructure facilities and the sound servicing capabilities of CIMB Bank.  Collections from Portfolio 2007-A will commingle with collections from the Servicer, CIMB Bank’s other hire purchase loans for one day before being remitted to the series collection account.  However, MARC is of the view that commingling risk is sufficiently mitigated given the strong credit standing of the Servicer (financial institution rating at AA/MARC-1) and the fact that commingling exposure will be limited to only one day.
 
Credit enhancement is provided by the overcollateralisation of 126.6% for Class A, 120.5% for Class B and  114.9% for Class C.  A liquidity facility amounting to 1.0% of rated notes provides additional support to meet liquidity needs under the transaction.  The sizing of credit enhancement was based on MARC’s analysis of default, delinquency and prepayment statistics of 115 static pools, covering the period from January 1996 to November 2005.  Loss multiples of 4 times, 3.0 times and 2.5 times were applied to the base case default rate of 7.0% under AAA, AA and A+ stress scenarios.  MARC has also assumed a high prepayment scenario with monthly prepayment rate of 1.2% in sizing the credit enhancement level under AAA stress scenario.

The MTN programme incorporates two periods: an amortisation period and an early amortisation period, the latter triggered by certain events.  MARC notes that certain events pertaining to the issuer or the originator/servicer may result in all outstanding notes series to be subject to early amortisation.  Nevertheless, interest of noteholders are protected as there is no cross collateralisation for each notes series.  Series 2007-A incorporates serial redemption with five tranches of Class A notes having legal maturities by end of the first, third, fifth, seventh and eighth year; Class B and C notes have legal maturities at the end of the eighth year; and Owners’ Notes have legal maturity of eight years and 30 days. As the transaction does not incorporate a revolving period, collections (including prepayments) from Portfolio 2007-A will be applied firstly towards redemption of Class A notes; each tranche to be progressively redeemed on a quarterly basis with principal redemption on Class A-1 notes commencing at the end of the second quarter from issuance date.