Published on 06 Oct 2009
RAM Ratings has assigned respective preliminary long- and short-term ratings of AAA (stable outlook) and P1 to Pengurusan Air SPV Berhad’s (the SPV or the Company) Proposed Islamic Medium-Term Notes Programme of up to RM20 billion in nominal value and Proposed Islamic Commercial Papers Programme of up to RM20 billion in nominal value; both facilities have a combined limit of RM20 billion in nominal value.
The Company is a special-purpose vehicle set up as a wholly owned subsidiary of Pengurusan Aset Air Berhad (PAAB), to undertake the financing of the latter’s acquisition of water assets and their accompanying liabilities in Peninsular Malaysia and the Federal Territory (FT) of Labuan. The SPV will also be responsible for the subsequent development of state water operators’ infrastructure.
The SPV’s income will be solely derived from the Ijarah rental payable by PAAB, which will be used to service the Company’s debt obligations. Under the Ijarah and Mushakarah structures, the sukuk holders’ recourse to PAAB is recognised via the Purchase Undertaking (PU) between the SPV and PAAB. Pursuant to the PU, PAAB (as the obligor) will buy the trust assets from the SPV upon the occurrence of certain events, at a price equal to the exercise price. In this regard, we recognise the strong credit link between the SPV and PAAB, and thus view both companies in aggregate from a credit perspective. Given this, the preliminary ratings are therefore a reflection of PAAB’s credit risk.
The ratings reflect the strategic importance of PAAB’s role as the asset owner of water infrastructure in Peninsular Malaysia and the FT of Labuan, pursuant to the restructuring of the water industry. PAAB is 100%-owned by Malaysia’s Minister of Finance Incorporated, and has been licensed to hold an individual facility licence for this role under the Water Services Industry Act 2006 (WSIA). The enactment of the WSIA and the Suruhanjaya Perkhidmatan Air Negara Act 2006 highlights the Federal Government’s commitment to facilitating a paradigm shift in the water industry. Notably, PAAB has been covenanted to be a directly or indirectly 100%-owned subsidiary of the Government at all times. Given the strategic nature of water infrastructure in the national context, RAM Ratings believes that support from the Government will be forthcoming if and when required.
We highlight that the final ratings to be assigned will be subject to RAM Ratings’ satisfactory review of the final approved documents from the relevant authorities, which must conform to information already received. Any material deviation in the final documents may result in a change in the preliminary ratings.
Media contact
Jocelyn Chiang
(603) 7628 1724
jocelyn@ram.com.my
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations, transfer and convertibility risks, repatriation risk, currency risk or any other risk apart from credit risk.
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Published by RAM Rating Services Berhad
©Copyright 2009 by RAM Ratings
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