Media Coverage / 17 July 2020

SMF Planning to Provide EBAS-SP This Year

PT Sarana Multigriya Finansial (Persero) or SMF plans to issue Sharia Asset Backed Securities in the form of Participation Letters (EBAS-SP) this year. If later it is successfully realized, the securities (securities) will be the first time the company will issue.

“Yes (some time to come will issue EBAS-SP), still in process, please pray that hopefully this year the first EBAS-SP will be published. Aamiin,” SMF Director Heliantopo told Investor Daily, Tuesday (7/14).

The man who is often called Topo said, since its foundation in 2005, the company only started issuing EBA-SP starting in 2009. Since then until 2019, SMF has facilitated as many as 13 accumulative securitization transactions reaching Rp 12.15 trillion.

Interestingly, he continued, all EBA-SP issued consistently have idAAA (triple A) rating. Starting from the time of issuance, when the annual review, until the securities are due, they still have a triple rating A. That is based on the specific and specific assets of the company, which are related to mortgage financing (KPR).

“So indeed this underlying asset is very specific and very distinctive. Because the longer the underlying assets of this KPR the longer the risk will be lower. Because the value of its assets continues to rise every year. Even if there is a mortgage default, the longer the loss will also be covered because its value goes up, “Topo explained.

He considered, the price of home ownership is getting higher every year. Although faced with difficult situations such as the Covid-19 pandemic, the price of home ownership tends to stagnate. According to Topo, this is influenced by the fact that the availability of home land has never increased. While the need for shelter continues to increase every year.

Meanwhile Topo explained, securitization transactions can transform illiquid assets in the case of mortgage claims, into securities or EBA-SP or EBAS-SP that can be traded on the capital market. With so many benefits can be achieved, both by KPR dealers and investors. From the KPR channeling side, he explained, banks for example are no longer dependent on third party funds (DPK), funds are available for financing new housing. Then, helping overcome the problem of maturity matched and reducing the need for capital adequacy ratio (CAR).

Meanwhile, from the investor side, EBA-SP or EBAS-SP can be a diversified investment portfolio at this time. In terms of collateral, it also has a basis and transparency, namely the KPR bill. In addition, the risk of default is lower because of the risk sharing to many KPR bills. This is supported by the triple A rating which can improve the overall risk profile.

Topo said that his party was selective in choosing mortgage lenders. The distributors must meet at least 32 criteria that can be securitized by the company. “So we have chosen the KPRs owned by the bank, because not everything can be securitized, filtered. After being selected, we divide again into two classes, namely class A and class B,” he added.

Topo also explained, class A had a portion of 90% and was offered to general investors. In the aspect of risk, class A has a low risk because it is targeted to pocket an idAAA rating with a fixed cash flow. Whereas class B receives a maximum allotment of 10% and is offered on a limited basis (offered back to the originator). The class has a high risk because it does not participate in the ranking and has a cash flow that is not fixed.

Underlying KPR debtor assets are not distinguished for the two classes, the difference is payment based on payment waterfall. That is, class B gets the most recent payment allotment, so that if there are mortgage debtors in arrears, class B receipts will decrease. Whereas class A gets a fixed coupon (fixed cash flow).

“According to BI (Bank Indonesia), the NPL for KPR is around 3-4%, it is in a roll. If filtered with the 32 criteria above, it can actually be said to be around 1%. For class B, it is prepared to fail to pay up to 10% right, even if class B is hit, “Only a small portion was hit as a whole. That is why the ranking can survive in idAAA,” he said.

Topo explained, the true idAAA rating gave an explanation that the possibility of default and late payment was relatively small. Moreover, every securitization must have a reserved account in the custodian bank as a one-time reserve of interest payments. That way, if there is a problematic liquidity, the investor’s rights can be paid temporarily. “Investors certainly have risks, but there are pads prepared. So since 2009 until now the rating is still triple A, hopefully it will continue. Let alone failing to pay the EBA, not to downgrade to double A, we will only keep on trying, “he said.

Source :  Investor Daily