RAM Ratings has assigned final P1 ratings to Cagamas Berhad's (the Company) RM20 billion Islamic and Conventional CP Programmes (collectively, the Programmes). The ratings reflect Cagamas' robust asset quality, solid capitalisation and systemic position within the domestic capital markets in its role as a liquidity provider.
As Malaysia's national mortgage corporation, Cagamas (rated gA2/Stable/gP1, seaAAA/Stable/seaP1 and AAA/Stable/P1) supports the national objective of achieving widespread homeownership and promoting the long-term development of the domestic capital markets. Notably, Cagamas is one of the largest issuers of corporate debt instruments in Malaysia; its securities are widely held by financial institutions and pension funds. Given the Company's strategic importance in the domestic market, RAM believes that support will be forthcoming in the event Cagamas ever experiences any financial distress.
Cagamas' assets mainly comprise of loans/financing purchased on "with recourse" (PWR) and "without recourse" (PWOR) bases. RAM highlights that some 92% of the Company's PWR exposures constitutes counterparties with at least AA ratings. As at end-December 2013, its PWOR exposure had jumped to 61% of its total receivables (end-December 2012: 46%), attributable to new purchases of housing loans/financing the previous year. Repayments on these housing loans/financing are non-discretionary and directly deducted from the borrowers' salaries. Given that non-discretionary salary deductions at source are a key feature of its PWOR portfolio, the significant increase will not affect the portfolio's overall asset quality. Moreover, the Company's overall risk-weighted capital-adequacy ratio of 24.3% is deemed superior as it is mainly underscored by high-quality capital such as common shares and retained earnings.
Cagamas' other rated instruments, i.e. its RM40 billion Islamic and Conventional MTN Programme (2007/2047) and RM5 billion Islamic CP/MTN Programme (2010/2040), currently carry respective AAA/Stable/- and AAA/Stable/P1 national-scale ratings from RAM. The Company's respective global- and ASEAN-scale gA2/Stable/gP1 and seaAAA/Stable/seaP1 corporate credit ratings are correlated with Malaysia's sovereign ratings to some extent, given Cagamas' systemic importance in the domestic financial system. In this regard, any movement in Malaysia's sovereign ratings could lead to a change in the Company's ratings.
More recently, Cagamas issued RMB1.5 billion, HKD1 billion and USD500 million of bonds under its USD2.5 billion Conventional EMTN Programme. For further details on Cagamas' credit profile and the Programmes, please refer to RAM's rationale published on 2 September 2014 and 19 June 2014, respectively.
-Ends-
Media contact
Lim Chern Yit
(603) 7628 1035
chernyit@ram.com.my
© Press Release 2015
