MARC has affirmed its AAA rating on Class Auto Receivables Berhad’s (Class Auto) RM395.0 million Class A Notes with a stable outlook. At the same time, the agency has upgraded the ratings of the RM20.0 million Class B and RM20.0 million Class C Notes to AAA from AA and A+ respectively. The notes were issued under a RM10.0 billion Medium Term Notes (MTN) Programme. The rating outlook for Class B and Class C Notes have been revised to stable from positive. The affirmation of Class A Notes and upgrade of Class B and C Notes reflect the increased credit enhancement levels for the notes, which is principally due to the pool’s better-than-expected performance. 

Class Auto is a special purpose vehicle incorporated for the purpose of securitising hire purchase receivables originated by CIMB Bank Berhad (CIMB Bank), and issuing the MTNs from time to time. The beneficial owner of the hire purchase receivables is Proton Commerce Sdn Bhd (PCSB) pursuant to the joint venture agreement entered into between the originator and Proton Holdings Berhad’s marketing arm, Proton Edar Sdn Bhd (PESB). PCSB was established with the objective of offering competitive financing products to new Proton car purchasers, leveraging on PESB’s extensive distribution network throughout Malaysia and the infrastructure facilities offered by CIMB Bank.

At transaction close, Class Auto purchased from CIMB Bank 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 Owners’ 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 history and loan-to-value of less or equal to 90%. Monthly collections from Portfolio 2007-A are allocated for the servicing of the coupon and principal payments for the rated 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 AAA/MARC-1/Stable).

As of June 30, 2010, Portfolio 2007-A has performed well above MARC’s expectations since transaction close as evidenced by its cumulative default and cumulative prepayment rates of 0.88% and 9.29%, respectively. The collateral pool, at the same date, had a principal outstanding balance of RM267.69 million (excluding the defaults amounting to RM4.3 million) and a weighted average seasoning of 57 months. Its strong performance had also led to early redemption of the notes, the outstanding amounts of which stood at RM261.0 million. As a result, credit enhancement levels for Class A, Class B and Class C Notes rose to 177.4%, 156.7%, and 140.3% (initial rating: 26.6%; 20.5%; 15.0%), respectively, based on the pool’s outstanding principal balance and a cash balance of RM3.6 million in the Collections Account. The higher credit enhancement levels offer increased protection against deterioration in credit quality of the loans as well as compression of interest arising from prepayments. Subsequent to further prepayments made in September 2010, the current outstanding amount of Class Auto’s notes is RM238.0 million.

MARC expects the strong performance of the collateral pool to continue based on its historical trend and our assessment of economic conditions. Based on the foregoing analysis, MARC concludes that available credit enhancement will adequately support the AAA ratings for all three classes of notes. 

Contacts:
Ruben Khoo Sheng Luen, 03-2090 2265/ rubenkhoo@marc.com.my;
Sandeep Bhattacharya, 03-2090 2247/ sandeep@marc.com.my.