RAM Ratings has assigned respective final ratings of AAA/Stable and AA3/Stable to the RM85 mil Class A and RM20 mil Class B Tranche 1 Medium Term Notes (collectively, Senior MTN) under Premier Auto Assets Berhad's (Issuer) RM1 bil Nominal Value MTN Programme (the Programme). Concurrently, the Issuer's unrated Junior MTN will be subscribed by ELK-Desa Capital Sdn Bhd (ELK-Capital or the Originator) at closing. The Issuer is a special-purpose vehicle incorporated specifically to facilitate the Originator's fundraising exercise through the securitisation of its portfolio of second-hand motor vehicle financing receivables. ELK-Desa Capital is a wholly owned subsidiary of ELK-Desa Resources Berhad, an investment holding company listed on the Main Market of Bursa Malaysia in December 2012.
Since the preliminary rating was published on 4 June 2019, some revisions have been made to the transaction. These include: (1) a smaller Senior MTN size of RM105 million compared to RM110 million earlier, reflecting the reduced final securitised portfolio of RM141.3 mil from RM143.7 mil; (2) a higher post-dividend distribution debt service coverage ratio covenant of 1.0 time from 0.5 times; and (3) additional expenses to be incurred by the Issuer in relation to recovery costs for defaulted accounts.
In assigning final ratings to the Tranche 1 Senior MTN, we considered the said changes in our assessment of the credit support required for the rated notes. Having reviewed the transaction documents for the MTN Programme, we are satisfied that they reflect the intended transaction structure represented during the preliminary rating exercise. Overall, we find these to be in order and largely in line with our earlier assessment for the preliminary ratings. Please refer to our final rating rationale for further details on the assigned ratings.
Upon closing, RAM will monitor the transaction's performance on a regular basis via monthly performance reports prepared by the Servicer andstee. We will keep the ratings under surveillance as long as there are outstanding tranches in the Programme.
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The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security's market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings' credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
Similarly, the disclaimers above also apply to RAM Ratings' credit-related analyses and commentaries, where relevant.
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