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MARC rates Cagamas Islamic CP/MTNs at MARC-1ID/AAAID.

BANKING AND CREDIT NEWS-13 July 2010-MARC rates Cagamas Islamic CP/MTNs at MARC-1ID/AAAID(C)1994-2010 M2 COMMUNICATIONS

13 July 2010 - Malaysian rating service MARC said today it has assigned its MARC-1ID/AAAID ratings to national mortgage corporation Cagamas Berhad's new Islamic Commercial Papers Programme (CP) and Islamic Medium Term Notes Programme (MTN) with a combined limit of MYR5bn (USD1.56bn/EUR1.23bn).

The outlook is "stable".

MARC has also affirmed its MARC-1/MARC-1ID and AAA/AAAID ratings with a "stable" outlook on Cagamas' existing MYR20bn Conventional and Islamic CP Programme and MYR40bn Conventional and Islamic MTN Programme.

Cagamas' first issuance under the new aforesaid programmes to the Sukuk holders will be known as Sukuk al-Amanah Li al-Istithmar or Sukuk ALIm, where each Sakk represents the proportionate right to the undivided interest in the Sukuk Trust. The assets placed in the Asset Trust will eventually comprise properties leased to and managed by Cagamas based on the Al-Ijarah principle and Al-Wakalah principle respectively, and receivables payable by Cagamas on a deferred basis under the Al-Bai' Bithaman Ajil principle. The issuer bears the responsibility for making timely and regular Sukuk repayments from the net lease payments (upon entering the Ijarah and service agency agreements) and/or the periodic payments due from the commodity transaction. Pursuant to the maturity of the Sukuk, Cagamas will be appointed as an agent to sell the asset certificate which represents the undivided interest in the Asset Trust to meet outstanding principal and final profit payments due to the Sukuk holders, or alternatively, the Sukuk holders would receive the outstanding principal and final profit payments from the final net lease payment from the properties and/or final instalment payment from the commodity transaction. MARC said it views the Sukuk as ultimately being supported by Cagamas' creditworthiness. Therefore, issuances under both programmes are assigned the same MARC-1/AAA rating as Cagamas' conventional unsecured debt.

The ratings on Cagamas mirror its strong financial profile as seen in its solid earnings generation and healthy capitalisation, its role as the national mortgage lender and its ownership structure, with the central bank, Bank Negara Malaysia, being its single largest shareholder with a 20% stake.

However, the agency cautions that the interest rate sensitivity continues to be a challenge for Cagamas. At the same time, MARC notes that Cagamas is pursuing innovative products on the still-evolving financial market in Malaysia while keeping additional risks at acceptable levels.

The "stable" outlook reflects the company's strong financial profile and enhanced risk control. It also factors in the very high probability of government backing, if needed, to maintain its key role for the stability of the domestic financial system.

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Publication:M2 Banking & Credit News (BCN)
Date:Jul 13, 2010
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