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RAM Ratings reaffirms rating of Starbright Capital’s water receivables-backed Notes
Published on 07 Nov 2022.
RAM Ratings has reaffirmed the AAA/Stable rating of Starbright Capital Berhad’s (the Issuer) RM665 mil asset-backed Medium-Term Notes (the Notes).
The transaction is structured to monetise the balance of receivables due under the Termination and Settlement Agreement (TSA) dated 24 May 2019 between Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (SPLASH or the Obligor) and Sungai Harmoni Sdn Bhd (the Originator). The Issuer has ultimate recourse to Pengurusan Air Selangor Sdn Bhd (Air Selangor or the Guarantor), which guarantees and undertakes in the TSA to pay any missed instalments payable by SPLASH, including default interest, upon written demand.
The reaffirmed rating reflects the credit profile of Air Selangor in its role as the Guarantor for the annual instalments payable under the TSA. Air Selangor – Malaysia’s largest water operator – is the sole licence holder of water supply and distribution services in Selangor and the Federal Territories of Kuala Lumpur and Putrajaya. It plays a critical public policy role to the Selangor state government. The highly anticipated support from the state in times of financial distress underpins our view that the Guarantor’s credit strength mirrors that of the state.
SPLASH has the right to prepay all unpaid portions of the settlement sum, together with any prorated interest charges, at any time after 26 September 2022. If this right is exercised, the Issuer must mandatorily prepay all outstanding Notes within five business days of receipt of the funds. The rating does not reflect prepayment risk in respect of the Notes.
As at 30 September 2022, Starbright received all scheduled annual payment from Air Selangor and redeemed RM75 mil Tranche 1 and RM75 mil Tranche 2, on their respective maturity dates. Available balances of RM100.0 mil in the Settlement Account, including permitted investments and future annual instalments from SPLASH of RM511.7 mil, are more than adequate to meet the outstanding MTN principal and profit obligations over the remaining tenure. The designated accounts report as at end-September 2022 indicates that actual transaction expenses incurred were broadly in line with the levels estimated.
Analytical contacts
Joel Thum
(603) 3385 2517
joel@ram.com.my
Tan Han Nee
(603) 3385 2529
hannee@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.
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
Published by RAM Rating Services Berhad
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