Published on 08 Jun 2021.
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). TVSB is committed to channelling its 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 Pujian, so that the Company will be able to service its MTN. Pujian is the sole holder of TVSB’s Junior Notes and depends entirely on TVSB’s residual cashflow.
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. This 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. Monthly payments from UiTM to TVSB have been timely while maintenance charge deductions for underperformance risk have been minimal. However, we highlight that at the current Sub-DSCR provides a limited buffer against potential cashflow underperformance by TVSB.
RAM’s stressed analysis assumes that TVSB will periodically make distributions to Pujian, to the extent permitted under its Senior MTN. That said, we expect some liquidity pressure on Pujian from 2025 onwards, given its inability to fund the debt service reserve account with the principal amount six months before repayment dates. That said, 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.
The transaction’s cashflow has been ringfenced with a tight financing structure and several restrictive covenants on the key stakeholders, to prevent cashflow leakage. 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.
On the other hand, the transaction is exposed to 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. TVSB’s Senior MTN. Pujian’s noteholders may still recover the advances extended to TRIplc. TRIplc is also obliged to inject more cash through additional advances to Pujian, or the subscription of preference shares as an additional recourse. All these have not been factored into RAM’s analysis. Pujian may also gain access to TVSB’s assets through its holdings of the Junior Notes, which rank second in terms of priority.
Davinder Kaur Gill
(603) 3385 2525
(603) 3385 2577
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