Moody’s affirms Cagamas Bhd’s A3/ P-2 issuer ratings, outlook stable

KUALA LUMPUR: Moody’s Investors Service has affirmed the A3 local and foreign currency longterm issuer ratings and Prime-2 (P-2) local and foreign currency short-term issuer ratings of Cagamas Bhd.

In a statement, the credit rating agency said the ratings outlook is stable.

At the same time, it has affirmed the (P)A3 foreign currency senior unsecured medium- term note ( MTN) programme ratings of Cagamas Global PLC and Cagamas Global Sukuk Bhd, as well as the A3 foreign currency senior unsecured debt ratings of Cagamas Global PLC

Both Cagamas Global PLC and Cagamas Global Sukuk Bhd are wholly- owned subsidiaries of Cagamas Bhd, and their principal activity is to raise funds for Cagamas Bhd.

Moody’s rating actions on Cagamas Bhd, Cagamas Global PLC, and Cagamas Global Sukuk Bhd follows the publication of Moody’s new Finance Companies rating methodology that is used to assess the company’s standalone credit assessment.

The changes and enhancements from Moody’s previous rating methodology for rating finance companies, include the introduction of new financial ratios such as a net charge-offs ratio and a debt maturity coverage ratio, the dynamic weighting of operating environment conditions that can adversely influence firms’ creditworthiness, and incorporation of specific qualitative factors as direct notching adjustments to ratings.

Moody’s will upgrade the A3 and (P)A3 ratings if Moody’s upgrades the Malaysian government’s A3 sovereign rating, assuming Cagamas Bhd’s standalone credit metrics remain robust.

But Moody’s could downgrade the ratings if it downgrades the Malaysian government’s sovereign rating, severe losses on Cagamas Bhd’s mortgage assets erode a significant portion of its capital and/or the company expands aggressively, stretching its capitalisation and liquidity.

A material increase in shortterm debt would also be negative for Cagamas Bhd’s ratings.

The methodologies used in these ratings were Finance Companies published in December 2018, and Government- Related Issuers published in June 2018.

Cagamas Bhd, headquartered in Kuala Lumpur, reported total assets of RM44.4 billion (US$11.0 billion) as of June 30, 2018. — Bernama