Published on 07 Nov 2022.
RAM Ratings has reaffirmed the AAA/Stable rating of Glacier Assets Berhad’s (the Issuer) RM555 mil Senior Notes under an Asset-Backed Medium-Term Notes Facility. The Senior Notes rank above the unrated Junior Notes (collectively, the Notes) under the facility.
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 Gamuda Water Sdn Bhd (the Originator). The Issuer has ultimate recourse to Pengurusan Air Selangor Sdn Bhd (Air Selangor or the Guarantor), which 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.
The TSA allows Air Selangor to prepay, in part or in full, remaining annual instalments together with accrued interests payable under the terms. Prepayment terms of the Senior Notes, which mirror the terms of the Obligor’s early redemption option under the TSA, minimise potential negative carry risk. The transaction includes a pre-funded maintenance account to meet the Issuer’s expenses over the life of the Notes and a pre-funded Early Redemption Account to cover early redemption premiums on the Senior Notes, if any. Funds in the Settlement Account cannot be used to make payments in respect of the Junior Notes until all Senior Notes have been fully redeemed. This mitigates cashflow leakage. The rating does not reflect the prepayment risk on the Notes.
As at 30 September 2022, Glacier received all scheduled annual payment from Air Selangor and redeemed RM85 mil Tranche 1 on its maturity date. Available balances of RM110.0 mil in the Settlement Account including permitted investments, and future annual instalments from SPLASH of RM464.3 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 largely in line with the levels estimated.
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Tan Han Nee
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