Hire Purchase and Leasing Debts
Originators of hire purchase and leasing (HP & L) debts who are supervised by BNM are eligible to sell their HP & L debts on with recourse basis to Cagamas.
The selling institutions are required to execute a Master Sale and Purchase Agreement (Hire Purchase and Leasing Debts) with Cagamas before selling their HP & L debts to Cagamas. For each transaction, Cagamas purchases a minimum of RM5 million worth of HP & L debts on a fixed rate basis for review periods of 3 to 7 years. All HP & L debts can be sold to Cagamas, including debts purchased by selling institutions on a block discounting basis. Every quarter, the selling institutions will repurchase from Cagamas HP & L debts that are defective and offer to sell to the Company, an equivalent amount of HP & L debts as replacement for the repurchased debts.
At the end of the contract review period (that is on the Review Date), the selling institutions are given the option to either continue the contract for a further price review period at the then prevailing Cagamas rate in accordance with the terms and conditions to be agreed upon between the Company and the selling institutions, or to repurchase the remaining balance of HP & L debts initially sold to Cagamas.
Eligibility Criteria of Hire Purchase & Leasing Debts
To be eligible for sale to Cagamas, the hire purchase and leasing debts must:
- be related to hire purchase/sale on credit terms/leasing of equipment;
- be fully disbursed and amortising;
- not be more than 1 month in arrear at the time of sale;
- have a remaining life which expires on or after the price review date;
- have a book balance less unearned finance charges, if any, not exceeding RM2 million per debt; and
- comply with all other criteria specified in the Cagamas Guide (Hire Purchase and Leasing Debts)
Types of Purchase Facilities Offered by Cagamas
Fixed RateCagamas fixed rates are quoted for review periods of 3 to 7 years. The contracted Cagamas rate is fixed for the whole review period for each transaction.
Back-to-Back ArrangementThe back-to-back purchase facility enables originators of HP & L debts who cannot sell their debts directly to Cagamas, to sell their debts through an intermediary financial institution (IFI) for onward sale to Cagamas. The originator is required to execute a Master Agreement with an IFI. Similarly, the IFI is required to execute a Master Sale and Purchase Agreement with Cagamas before it may offer HP & L debts for sale to Cagamas. The originator is required to pay the IFI a one-off up front arrangement fee as the arranger of the sale transaction.
Repayment Options Available
The selling institution has the option to pay the instalments in respect of each pool of debts sold to Cagamas, on a monthly, quarterly or half-yearly basis, depending on its funding requirement. This option has to be exercised upon entering into the purchase contract with Cagamas.