Published on 23 Sep 2020.
RAM Ratings has reaffirmed the AA3/Stable rating of Pujian Bayu Sdn Bhd’s (Pujian or the Company) RM200 mil MTN Programme (the MTN). Pujian is a wholly owned funding vehicle of TRIplc Berhad (TRIplc), and a sister company of TRIplc Ventures Sdn Bhd (TVSB). TVSB holds a 23-year concession for the development and maintenance of a campus for Universiti Teknologi MARA (UiTM) in Puncak Alam, Selangor (the Project). It is the key source of Pujian’s MTN repayments. Pujian depends entirely on TVSB’s residual cashflow - in the form of dividend distributions and repayments on TVSB’s Junior Notes Issuance Programme of up to RM85 mil (Junior Notes) - to service its MTN. Pujian is the sole holder of the Junior Notes.
The reaffirmed rating is premised on Pujian’s adequate liquidity and healthy projected subordinated debt service coverage ratio (Sub-DSCR) of at least 1.21 times (with cash balances and calculated in payment months) under our sensitised case – a level that is commensurate with the Sub-DSCR requirement of an AA3-rated non-complex public-private-partnership/project-finance-initiative (PPP/PFI) project. The rating is also supported by TVSB’s stable and predictable concession cashflow. Since the Project’s completion in April 2014, payments from UiTM have been timely while maintenance charge deductions have been minimal.
Based on TVSB’s performance thus far, RAM has revised a few assumptions on its projected cashflow. They include a delay in hike of maintenance revenue, higher operating expenses and lower interest income (in line with the aggressive cut in interest rate by Bank Negara Malaysia). These reduce the residual cashflow of TVSB that may be channelled to Pujian, after the former meets its operational needs and debt obligations under its own RM240 mil MTN Programme (Senior MTN, rated AAA(fg)/Stable by RAM). Consequently, Pujian’s credit metrics will be weaker, from our initially projected minimum Sub-DSCR of 1.33 times to 1.21 times. It also leaves a limited buffer against potential underperformance.
Our stressed analysis assumes TVSB will optimise its distributions, to the extent permitted under its Senior MTN. We have also not accorded any benefit to potential support from TRIplc under the sensitised case due to its limited financial capacity. Pujian’s strong cash reserves may also temporarily cushion liquidity pressure in the event of non-distribution by TVSB. That said, we expect greater liquidity pressure on Pujian from 2029 onwards, given its inability to fund the debt service reserve account with the principal amount six months before repayment dates. However, a breach in this regard is unlikely as the transaction provides a remedy period that allows the principal amount to be fully built up one month before the payment due dates.
We note that the transaction’s cashflow is ringfenced by a tight financing structure and several restrictive covenants on the key stakeholders, to prevent cash leaks. For instance, Pujian is prohibited from making any distribution to its shareholder or taking on any other debt. There are also controls over the maintenance and administrative costs payable by TVSB to its related companies.
The transaction faces the risk of concession termination as the Government of Malaysia (GoM) has no direct obligation to Pujian’s noteholders. In the unlikely event of default by TVSB, compensation from the GoM will only address the financing taken up to fund the construction of the Project, i.e. the Senior MTN. However, Pujian’s MTN holders may still recover the advances extended to TRIplc. Pujian may also gain access to TVSB’s assets through its holdings of Junior Notes, which rank second in terms of priority.
Chu Jia Ying
(603) 3385 2519
(603) 3385 2577
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