Monday, September 13, 2010

RAM Ratings puts Idaman Capital's super senior bonds on negative Rating Watch

KUALA LUMPUR: RAM Rating Services Bhd placed the superior senior bonds issued by Idaman Capital Bhd on Rating Watch, with a negative outlook after one of its obligors recently defaulted.

The ratings agency said on Monday, Sept 13 the decision affected the AAA ratings of Idaman's RM50 million Class A and RM430 million Class B super senior fixed-rate bonds

"The negative Rating Watch has been prompted by RAM Ratings' concerns over the vulnerability of the super senior Bonds given the recent default by one of Idaman's obligors," it said.

RAM Ratings said it was concerned about the liquidity positions of a number of the credit-impaired obligors given the impending interest and principal payments falling due on Oct 11, 2010.

Idaman is a trust-owned, bankruptcy-remote, special-purpose vehicle, incorporated specifically to undertake this primary collateralised-loan-obligation transaction.

Idaman had utilised the bonds' proceeds to purchase an RM800 million loan portfolio from Alliance Investment Bank Berhad.

Meanwhile, the bonds are secured against the loan portfolio that had originally consisted of 25 obligors; Idaman utilises the interest and principal receipts from the portfolio to meet its operating expenses as well as coupon and principal payment obligations on the bonds.

Since RAM Ratings' last quarterly update in July 2010, the credit estimates of one of the four credit-impaired obligors has been downgraded to D, following its failure to service the interest on its other loans; "we understand that this obligor has since embarked on a financial-restructuring scheme to resolve its debt woes".

RAM Ratings said while the Super Senior Bonds are still able to withstand the loss of cashflow from the defaulted obligor under a AAA rating stress scenario, the negative Rating Watch reflects the potential downward rating migration of the super senior bonds should more than one of the three remaining credit-impaired obligors fail to honour their debt commitments.

It noted that the remaining credit-impaired obligors are still paying their monthly amortisation charges, as per their agreements with the portfolio manager.

"RAM Ratings is currently conducting the annual review of Idaman's debt ratings; this is expected to be completed by November 2010," it said.

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