Fitch Ratings (Thailand) Limited has today affirmed the National Long-term rating of ‘A(tha)’ on the Senior Tradable Residential-backed Secured Bonds (“the Bonds”) issued by GT Stars II Company Limited (“GT Stars II”). The transaction is a securitisation of predominantly impaired residential mortgage loans originated in Thailand, launched in July 2002 and sponsored by Lehman Brothers, Thailand. Payments on the bonds have been on schedule and have exceeded Fitch’s stress scenario. The cash reserve for one-year’s interest payments has been maintained at all times.
Over the past three-and-a half-years (May 2002 to September 2005), gross collections on the two underlying loan portfolios, Global Thai Property Fund (“GTPF”) and Palarp Asset Management Company Limited (“PAMCO”) totalled approximately THB8.4 billion. After reserves and expenses, all excess cash has been used to make principal payments on the bonds and the Tenret Company Limited (“Tenret”) loan granted to GT Stars II, which ranks equally with the bonds. As of November 2005, total cumulative repayments amounted to THB6,838 million, of which THB4,454m was paid to bondholders, and THB2,384m to Tenret, representing approximately 95% of GT Stars II’s obligations. At end-September 2005, the two portfolios had a remaining pool of 6,381 loans with a total unpaid principal balance (“UPB”) of THB7.9bn (23.8x of remaining obligations) for secured claims, and a combined collateral value (“CV”) of approximately THB6.9bn (20.7x of remaining obligations). GT Stars II’s obligations, currently THB332m, are expected to be paid off by 2006, approximately one year ahead of schedule.
In an effort to maximise portfolio value, Capital Advisory Services (“CAS”) manages the repurchase of assets backing some of the impaired loans in the portfolio (also known as real estate-owned (“REO”) assets) that cannot be auctioned at a favourable price. After making minor improvements to them, CAS will then attempt to sell them at a higher price. As the portfolio’s focus shifts increasingly towards auction and REO sales (which are expected to contribute the highest proportion of future collections versus a historical level of 10%), expenses are likely to increase significantly, although this should be partially offset by improved recovery values. A few adverse legal lawsuits concerning the Financial Sector Restructuring Authority (“FRA”) sale process have passed through the lower courts over the past two years, but Fitch notes they do not appear to have affected the legal claims or performance of the overall portfolio to date.
A performance report on GT Stars II will be available shortly on the agency’s website, www.fitchratings.com
Contact: Pimolpa Simaroj, Vincent Milton; Bangkok, Tel: +662 655 4755;Wit Solberg, Hong Kong, +852 2263 9922.
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with sub- or low-investment grade international sovereign ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable.
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