[RAM] RAM Ratings reaffirms ratings of RCE Marketing-sponsored Al Dzahab's Tranches 3 to 5 Sukuk

RAM Ratings has reaffirmed the respective AAA/Stable ratings of the Class A and Class B Sukuk under Al Dzahab Assets Berhad’s (Al Dzahab or the Issuer) Tranches 3 to 5 Sukuk Murabahah (collectively, the Sukuk) (see table). Al Dzahab is a special-purpose vehicle, incorporated to undertake the securitisation of personal financing (PF) facilities originated through the business partners of RCE Marketing Sdn Bhd (RCEM or the Originator).

Each sukuk tranche is backed by its own discrete portfolio of PF receivables from civil servants. The PF facilities are repaid through non-discretionary salary deductions processed by the Accountant General’s Department via EXP Payment Sdn Bhd and Angkatan Koperasi Kebangsaan Malaysia Berhad, an apex cooperative. This reduces the transaction’s exposure to the customers’ credit risks, as long as they remain in active service.

The rating actions reflect the better than assumed loss performance of the portfolios backing the respective tranches, and the resultant strong credit support that is more than sufficient to cover losses assumed in an AAA rating stress scenario. During the review period, the default behaviour of Tranches 3 to 5 portfolios continued to outperform our expectation, with the average monthly net default rate hovering at -0.02%, far lower than our base assumption of 0.09%. We do not expect the transaction’s default performance to deteriorate substantially going forward in view of the non-discretionary nature of the salary deductions and the continued low attrition rate of civil servants. 

Meanwhile, prepayments were more volatile during the review period, with spikes beyond our ‘high prepayment’ scenario. Higher prepayments resulted from a backlog in processing prepayment applications – which was halted during the movement control order period – and refinancing by customers incentivised either by promotional campaigns or lower profit rates. Overall, the average monthly prepayment rate since issuance remained well within our stress assumptions. 

Analytical contacts
L Nurisya Abdullah
(603) 3385 2492

Lim Chern Yit
(603) 3385 2528