MARC has placed CapOne Berhad’s (CapOne) AAA-rated RM600.0 million super senior Class A-1 secured bonds, AAA-rated RM250 million senior Class A-2 secured bonds, AA-rated RM50.0 million mezzanine Class B secured bonds and B-rated RM100.0 million subordinated secured bonds (Bonds) on MARCWatch Negative following a missed interest payment by an obligor belonging to the automotive industry. This most recent default leads MARC to believe that the assigned ratings of the super senior, senior, mezzanine and subordinated bonds may no longer be consistent with the credit enhancement available. MARC is reviewing the ratings for possible downgrade and will incorporate its recovery expectations in respect of the defaulted loan in the new cash flow runs for CapOne.

The Bonds are secured by 22 performing corporate loans amounting to RM880.0 million and a liquidity reserve of RM32.0 million as at 28 March 2008. Since transaction close, the underlying portfolio securing the Bonds has experienced a total of 14 downgrades. Inclusive of the recent default, the portfolio has experienced 3 defaults totalling RM120.0 million, with no recoveries to date.

CapOne is a bankruptcy remote special-purpose company incorporated in Malaysia, established for the purpose of carrying out this primary Collateralised Loan Obligations programme. At transaction close in September 2005, EON Bank Bhd, the originator, extended newly generated loans to a selected group of 25 corporate borrowers and assigned the rights, title and interests in and to the corporate loans to CapOne. The transaction is structured as a true sale of the corporate loans portfolio from the originator.

MARC expects to resolve this MARCWatch placement within the next month.