MARC has affirmed its AAA_IS and AAA ratings on Cagamas MBS Berhad’s (Cagamas MBS) asset-backed Sukuk Musyarakah issuances (CMBS 2005-1; CMBS 2007-1-i) and fixed rate serial bonds issuances (CMBS 2005-2; CMBS 2007-2). The outlook on all ratings are stable. 

Cagamas MBS is a wholly-owned special purpose vehicle of Cagamas Holdings Berhad and was established to undertake the securitisation of conventional and Islamic home financing originated by the Malaysian government. The affirmed ratings and outlook are supported by strong collateral pool for the issuances. While defaults could increase, stemming from the impact from the COVID-19 pandemic, the default risk of the collateral pool is expected to remain low, underpinned by the mortgage payment mechanism through deductions of monthly salary or pension. 

CMBS 2005-1 is backed by a pool of government staff Islamic home financing (GSIHF). The collateral pool performance of CMBS 2005-1 remains strong after 58 quarters (at end-September 2019), supported by the portfolio’s historically low cumulative default rates of the initial pool balance. The rating action has considered CMBS 2005-1’s strong credit enhancement level which stood at 364.1% at end-September 2019. The outstanding principal of non-defaulted home financing stood at RM764.3 million and with combined cash and permitted investments of RM692.3 million, it has more than sufficient liquidity to meet the payment on the final tranche of RM400.0 million which is due on August 7, 2020.

CMBS 2007-1-i is backed by a pool of GSIHF. The collateral pool performance of CMBS 2007-1 remains strong after 51 quarters (at end-October 2019), supported by the portfolio’s historically low cumulative default rates of the initial pool balance. The rating action has factored in CMBS 2007-1-i’s strong credit enhancement level which stood at 199.0% at end-October 2019. The outstanding principal of non-defaulted home financing stood at RM971.5 million and combined cash and permitted investments at RM248.0 million. The repayment on the next tranche of RM320.0 million on May 27, 2022 will be met by future collection and its cash balances. The sukuk programme currently has an outstanding amount of RM610.0 million.

CMBS 2005-2 is backed by a pool of government staff housing loans (GSHL). The collateral pool performance of CMBS 2005-2 remains strong after 56 quarters (at end-March 2019), supported by the portfolio’s historically low cumulative default rates of the initial pool balance. The rating action has considered CMBS 2005-2’s strong credit enhancement level which stood at 255.2% at end-March 2019. The outstanding principal of non-defaulted home financing stood at RM839.0 million and with combined cash and permitted investments of RM820.0 million, it has more than sufficient liquidity to meet its next redemption of RM385.0 million under Tranche 6 due on December 11, 2020. The bond programme currently has an outstanding amount of RM650.0 million.

CMBS 2007-2 is backed by a pool of GSHL. The collateral pool performance of CMBS 2007-2 remains strong after 50 quarters (at end-August 2019), supported by the portfolio’s historically low cumulative default rates of the initial pool balance. The rating action has factored in CMBS 2007-2’s strong credit enhancement level which stood at 316.7% at end-August 2019. The outstanding principal of non-defaulted home financing stood at RM623.7 million and with combined cash and permitted investments of RM500.3 million, it has more than sufficient liquidity to meet its next redemption of RM250.0 million under Tranche 6 due on August 22, 2022. The bond programme currently has an outstanding amount of RM355.0 million.

Contacts:
Douglas De Alwis, +603-2717 2965/ douglas@marc.com.my;
Mohd Izazee Ismail, +603-2717 2947/ izazee@marc.com.my.