NHMFC retains high ratings for P420-M bonds

MANILA, Philippines – Philippine Rating Services Corp. has maintained the issue credit rating of PRS Aa for the P420 million class A and B senior notes of National Home Mortgage and Finance Corp.’s (NHMFC) Bahay Bonds 2 Securitization Transaction (BB2).

Obligations rated ‘PRS Aa’ are of high quality and are subject to very low credit risk. The obligor’s capacity to meet its financial commitment on the obligation is very strong.

PhilRatings has likewise assigned a rating outlook of Stable to the credit ratings of the class A and B senior Notes.

A Stable outlook is defined as: “The rating is likely to be maintained or to remain unchanged in the next 12 months.”

The local credit watcher also maintained the PRS Baa issue credit rating for the P183.74 million class C subordinated notes.

Obligations rated ‘PRS Baa’ exhibit adequate protection parameters. Adverse economic conditions and changing circumstances, however, are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

A Negative outlook, however, was assigned by PhilRatings to the class C subordinated notes and is defined as: “There is potential for the present credit rating to be downgraded in the next 12 months.

The class C subordinated notes provide a degree of protection for the Class A and B senior notes as the Class C subordinated notes will absorb initial losses that may be brought about by mortgage accounts which are included in the asset pool and which may go into default given prevailing circumstances.

The ratings took into account cash accumulated for the settlement of bullet payments for the principal of the notes, timely remittances of interest payments, and favorable economic conditions.

PhilRatings also considered the continued deterioration in delinquency rate which has  resulted in lower excess spread and cash collected.

“The balance of the subordinated notes has remained intact at P183.74 million as of end-May 2015,” PhilRatings said.

PhilRatings, however, noted that the percentage of the total unpaid principal balance of delinquent accounts to the loan portfolio balance has been increasing for the past monitoring periods. This increases the risk or likelihood of shortfalls in interest and penalty collections from the asset pool compared to the sum of senior expenses and interest payable to the senior notes occurring in the future.

NHMFC launched its maiden securitization issue referred to as Bahay Bonds 1 or BB1 in March 2009.