This update on the performance of the Aegis One Berhad (Aegis One) collateral pool follows a single obligor rating downgrade to below BBB (lowest allowable rating) since MARC’s previous announcement in October 2007. All other obligor ratings remain unchanged.  To date 30.77% of the obligors (by loan amount) are rated in the BBB band. Notwithstanding the negative migration in the single obligor’s credit quality, the senior secured bonds and subordinated secured bonds have maintained their ratings of AA and B respectively since MARC’s previous rating action in February 2007.

The senior secured bonds have been deleveraging as a result of two early redemptions in November 2006 and May 2007 subsequent to failed Overcollateralisation Coverage (OC) tests.  To date RM19.8 million of the original outstanding principal has been paid down and the OC stands at 103.4%.

The bonds are collateralised by 23 performing corporate loans amounting to RM910.0 million and a liquidity reserve of RM11.8 million as at September 2007. With the additional downgrade in an obligor’s rating and the OC ratio below the threshold of 105%, MARC is of the view that the current AA rating of the senior secured bonds remains consistent with the credit enhancement available.  Based on the total credit enhancement of 4.7%, the senior secured bonds can withstand losses up to approximately RM41.0 million.  To date, there have been no recoveries of defaulted loans and MARC does not anticipate recoveries prior to the final redemption of the bonds.

Subsequent to MARC’s rating update in October 2007, senior and subordinated bondholders of Aegis One have agreed to grant the issuer grace period of three and seven business days respectively after the original maturity dates to make the principal repayment on the bonds. This will mitigate the risk of payment delay arising from the loans falling due on November 29, 2007 which coincidentally is also the original maturity date of the bonds.

Aegis One is a bankruptcy remote special-purpose company incorporated in Malaysia, established for the primary purpose of undertaking this primary collateralised loan obligation (CLO) programme. Upon closing in November 2002, Affin Bank Bhd (Affin Bank) as the originator transferred its rights, title and interest in, to and under a pre-identified portfolio of corporate loans to Aegis One. The transaction is structured as a true sale of the corporate loans portfolio by the originator.