It said on Friday the MTN is secured against staff mortgages originated by Telekom Malaysia Bhd.
The first notes series was issued in 2009 under the issuer’s RM1bil MTN programme, of which RM35mil remains outstanding.
“The reaffirmation of the rating reflects the ample collateral coverage supporting the transaction – the overcollateralisation (OC) ratio as at end-March 2018 stood at 111.38%, backed by RM69.3mil in outstanding mortgage principal and RM4mil in cash.
“The substantial increase in OC had resulted from continuous deleveraging of the MTN through the transaction’s partial early redemption option, where RM16mil was redeemed during the review period owing to the securitised portolio’s favourable default and prepayment performance,” it said.
RAM Ratings said during the review period, the securitised portfolio’s monthly net default rates were largely below its assumed level of 0.03% per month.
This translated into a cumulative net default rate of 0.26% as at the end-March 2018 against its base case of 6.51%.
Separately, the cumulative prepayment rate as at the same date was 28.57% (end-March 2017: 27.12%).
The prepayments partly contributed to the partial redemptions made over the course of the year. Even under our simulation, using assumptions commensurate with an AAA stressed scenario, the transaction is envisaged to be fully redeemed in less than three years, compared to the 16-year remaining term to maturity.
The first notes series benefits from additional credit enhancements available to the issuer, notably through mortgage programme fee payments from the originator, which mitigates negative yield spread in the transaction – AmMortgage has received RM38.2mil to date.
RAM Ratings said in this regard, the transaction is exposed to the credit profile of Telekom (Telekom's credit facilities are rated AAA/Stable/P1), which is also the ultimate paymaster of the obligors’ salaries.
“That said, we believe that the group’s exceptional financial position and strategic role as Malaysia’s national telecommunication company underscore its superior credit profile.
“We have also considered the servicing ability of the transaction’s servicer – AmBank (M) Bhd – including its administration of the entire TM employee mortgage scheme for and on behalf of Telekom.
“We expect AmBank to adequately perform its servicer responsibilities under the transaction documents,” said RAM Ratings.
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