TRIS Rating has affirmed the rating of the three-year amortizing guaranteed debentures (guaranteed debentures) issued by SPV-SMC (6) Co., Ltd. (the Issuer or the SPV) at “AA-(sf)”. This is the second rated issue of residential mortgage backed securities (RMBS) originated by the Secondary Mortgage Corporation (SMC or the Guarantor). The guaranteed debentures are unconditionally and irrevocably guaranteed by SMC. The rating reflects the rating of guarantor, SMC, rated “AA-” with “stable” outlook by TRIS Rating. The issue rating is also supported by the liquidity facility provided by SMC, and the obligation of SMC to buy back the Assets, a pool of mortgage loans, when the bonds mature.
SMC, the Guarantor, was established in 1997 under the Emergency Decree on Secondary Mortgage Finance Corporation B.E. 2540 (the SMC Act). SMC’s initial capital was Bt1,000 million. As a state enterprise financial institution under the supervision of the Ministry of Finance (MOF), SMC’s role is to develop the secondary market for housing mortgage loans. SMC will use asset securitization as a tool to raise funds. Under the SMC Act, the Thai government can guarantee the debt issued by SMC but only up to a maximum of 4 times SMC’s capital. At the end of June 2014, SMC’s capital funds totaled Bt867 million. Thus, the government can guarantee up to Bt3,468 million of SMC’s debts. SMC is the servicer and liquidity provider for this transaction.
The Issuer is a special purpose company established under the Thai law, which was granted special purpose vehicle status by The Securities and Exchange Commission (SEC). Its shareholders are SMC (48%), Good Service Co., Ltd., (48.99%), and individuals (3.01%). At the beginning of the transaction, the issuer issued Bt2,037.38 million in debentures, comprising Bt1,500 million of amortizing guaranteed debentures and Bt537.38 million of subordinated debentures. The guaranteed debentures were sold to investors, while the subordinated debentures were held by SMC. The subordinated debentures are ranked lower than the guaranteed debentures and serve as a credit enhancement for the guaranteed debentureholders. The proceeds from the sale of the debentures were used to purchase from SMC the right to receive payments from a pool of mortgage loans, or the Assets, that SMC purchased from Kasikorn Bank PLC (KBANK or the seller). The principal on the pool of mortgage loans was Bt1,982.96 million.
At the end of September 2014, the value of the outstanding guaranteed bonds was Bt1,408 million while the remaining principal on the loans was Bt1,819.39 million. From January 2014 to September 2014, the SPV received Bt238.85 million in monthly payment from the borrowers, comprising Bt105.41 million in scheduled principal payments, Bt70.67 million in interest payments, and Bt62.77 million as prepaid principal. The prepayment amount was around 3.17% of the original principal value of Bt1,982.96 million. The amount of net non-performing loans (NPLs), net of recoveries, was Bt22.67 million or 1.14% of the original portfolio value.
Monthly installments received from each mortgage borrower will be deposited into SMC’s account first, and will be transferred to the SPV’s bank account at the end of each month. The principal component will be used to repay the principal portion of the guaranteed debentures, to deposit in the cash reserve account in the amount of 10% of the net monthly installments received (net of all fees and service expenses), to repay loans from SMC, and lastly to repay the principal portion of the subordinated debentures. The interest component will be used mainly to pay interest on the rated debentures and pay fee and service expenses. The outstanding amount of the subordinated debentures at the end of September 2014 was Bt477.23 million or 25.3% of the total outstanding debentures value, slightly declining from 26.4% of the original total value of the debentures at the beginning of transaction.
In this transaction, around 23% of the guaranteed debentures will be amortized during the term of the debentures. The ability of the guarantor, SMC, to buy back the remaining Assets at the maturity date determines the ultimate repayment of the principal of the guaranteed debentures. In addition, any shortfalls during the life of the rated debentures will be covered by financial supports from SMC. Thus, in this transaction, the rating of the guaranteed debentures will change if the rating of the guarantor changes
MBSC16DA: Bt1,408 amortizing guaranteed debentures due 2016 AA-(sf) TRIS Rating Co., Ltd./www.trisrating.com Contact: santaya@trisrating.com, Tel: 0-2231-3011 ext 500/Silom Complex Building, 24th Floor, 191 Silom Road, Bangkok 10500, Thailand ? Copyright 2014, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information. All methodologies used can be found at http://www.trisrating.com/en/rating-information/rating-criteria.html