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RAM Ratings affirms rating of Starbright Capital’s water receivables-backed notes
Published on 18 Oct 2024.
RAM Ratings has affirmed the AAA/Stable rating of the RM665 million Medium-Term Notes (MTN) issued under Starbright Capital Berhad’s (Starbright or the Issuer) RM700 million Asset-Backed Medium-Term Notes Facility.
The transaction monetises the remaining receivables due under the Termination and Settlement Agreement (TSA) between Pengurusan Air Selangor Sdn Bhd (Air Selangor or the Guarantor), Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (SPLASH or the Obligor) and Sungai Harmoni Sdn Bhd (the Originator). The receivables represent amounts due from SPLASH to Sungai Harmoni for the operations and maintenance of Phase 1 of the Sungai Selangor Water Treatment Plant.
Established as a special-purpose funding vehicle, Starbright relies exclusively on fixed annual instalments payable by SPLASH under the TSA (Annual Instalments) to service the MTN. In the event of any missed payments, the Issuer has recourse to Air Selangor – SPLASH’s parent company – which has committed to cover any missed Annual Instalments and default interest, as necessary, upon written demand.
The affirmation of the MTN rating is driven by Air Selangor’s credit strength (click here for more information) in its role as Guarantor for the Annual Instalments payable under the TSA. As the largest water operator in Malaysia, Air Selangor holds the sole licence for water treatment and distribution services in Selangor, Kuala Lumpur and Putrajaya. Its critical public policy function for the state of Selangor highlights the importance of ongoing state government support, especially in times of financial difficulty. In our view, the Guarantor’s creditworthiness is closely tied to Selangor’s financial resilience. The state’s robust credit standing is reflected in its top-tier classification under RAM’s State Implicit Strength Framework.
To date, Starbright has received all scheduled Annual Instalments on time. As of end-June 2024, RM1.66 million in cash was held in the transaction’s Settlement Account. This along with the remaining RM416.97 million of receivables due is more than sufficient to meet all outstanding coupon and principal payments on the MTN. The designated accounts report for the same period indicates that actual transaction expenses stayed in line with previous estimates.
The transaction permits the Issuer to use any residual balance in the Settlement Account, once all transaction obligations are met, to pay down the outstanding deferred purchase price of the receivables on each anniversary of the issue date.
Analytical contacts
Darrel Tiang
(603) 3385 2531
darrel@ram.com.my
Tan Han Nee
(603) 3385 2529
hannee@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@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
© Copyright 2024 by RAM Rating Services Berhad
