MARC has affirmed the long-term ratings of Class Auto Receivables Berhad’s (Class Auto) RM395.0 million Class A, RM20.0 million Class B and RM20.0 million Class C notes at AAA, AA and A+, respectively. The ratings carry a stable outlook. Since issuance through September 2008, the transaction has experienced better than expected delinquencies and cumulative defaults and lower than expected prepayments. Consequently, credit enhancements for Class A, Class B and Class C notes have risen to 35.4%, 27.3% and 20.1% respectively. MARC believes, however, that the delinquency and default performance of the transaction could exhibit weaker trends in the coming months as a result of softer economic growth and has consequently affirmed all classes of outstanding notes.

Class Auto is a special purpose vehicle incorporated for the purpose of purchasing hire purchase receivables from the originator, CIMB Bank Berhad (CIMB Bank), from time to time. At transaction close, Class Auto purchased from the originator an eligible pool of hire purchase receivables with principal outstanding amounting to RM500.0 million (Portfolio 2007-A), by way of equitable assignment with Class Auto having beneficial interest over Portfolio 2007-A. The purchase was funded by proceeds raised from the issuance of RM395.0 million Class A, RM20.0 million Class B, RM20.0 million Class C and RM70.0 million Owner’s notes (Notes Series 2007-A). Notes Series 2007-A represents the first issuance by Class Auto under a RM10.0 billion nominal value asset backed Medium-Term Notes programme. Under the transaction, the originator has also assumed the role of servicer for the securitised hire purchase receivables.

Portfolio 2007-A comprises hire purchase receivables of new Proton cars, with minimum seasoning of three months, good payment record and loan-to-value of less or equal to 90%. Monthly collections with respect to Portfolio 2007-A fund coupon and principal payments for the notes. Under the transaction, collections from Portfolio 2007-A are held back with the servicer for one day before being remitted to the series collection account. Nevertheless, MARC is of the opinion that the one-day commingling risk is mitigated by CIMB Bank’s strong credit standing (rated AA+/MARC-1).

As of September 2008, the active hire purchase receivables of Portfolio 2007-A stood at RM422.8 million (excluding defaulted principal balance of RM1.7 million) and cash balance of RM2.3 million, translating to increased credit enhancements for Class A, B and C of 35.4%, 27.3% and 20.1% respectively (initial rating: 26.6%;20.5%;15.0%). Projected credit support after taking into account interest collection of RM81.2 million and projected interest payments on the notes are approximately 29.7% for Class A, 21.9% for Class B and 15.0% for Class C (initial rating: 25.5%; 19.4%; 14.0%, respectively).

Since transaction close through September 2008, portfolio default occurrences were significantly lower than the stress scenario, charting a cumulative 0.33% against our original base case assumption of 0.96%. Cumulative prepayment rate of 1.87% over the same period is also significantly lower than MARC’s base case assumption of 7.2%. Based on the foregoing analysis, MARC concludes that available credit enhancement will adequately support the existing ratings on the three classes of notes. 

As of December 2008, approximately RM101.0 million of Class A has been fully redeemed.

Contacts:
Azlina Mohamed Noor Beg, 03-2090 2254/ azlina@marc.com.my;
Anthony Eng, 03-2090 2255/ anthony@marc.com.my.