MARC has assigned a rating of AAA(s)ID (AAA Support, Islamic Debt) to Sarawak Specialist Hospital & Medical Centre Sdn Bhd’s (SSHMC) Istisna’ Serial Bonds (Bonds). The rating reflects the AAA rating of the Sarawak State Government as the principal and profit payments of the Bonds will be satisfied via proceeds of share subscription payments as evidenced by the back-to-back Redeemable Preference Share Subscription Agreements between the State Financial Secretary Incorporated (SFS Inc.) and SSHMC Management and Holdings Sdn Bhd (SSHMC Holdings), and SSHMC Holdings and the Issuer, SSHMC. SFS Inc. is a statutory corporation established under the State Financial Secretary (Incorporated) Ordinance under the laws of Sarawak and controlled by the State.

SSHMC was incorporated in July 2001 to facilitate the construction of Sarawak International Medical Centre (SIMC), a project conceived by the State Government of Sarawak. SSHMC is a wholly-owned subsidiary of SSHMC Holdings which in turn is wholly-owned by SFS Inc. SSHMC’s current paid-up capital is RM50.5 million.

Proceeds from the proposed financing exercise will be mainly utilized to finance the construction of SIMC and its related cost; and to finance the purchase of medical and non-medical equipments. The development of this phase will include three- storey hospital podium complex with an attached eight-storey inpatient accommodation building, a section of the main access road from Kota Samarahan Expressway and a portion of the inner ring road plus linkage to UNIMAS.

The proposed SIMC, covering an area of approximately 100 acres, is located at Kota Samarahan and will have an easy access to Kuching City and Kuching International Airport. In addition, Technology Park which is situated to the north and UNIMAS to the south of SIMC, will help enhance SIMC’s image as a potentially dynamic medical hub in line with its vision to become a medical centre of excellence for the people of Sarawak and the surrounding countries.

The proposed hospital is designed to meet the demands of a highly specialized modern health care facility. The selection of medical equipment and information technology application will be driven by the latest technology available.

Under the proposed Istisna’ Bonds, SSHMC will issue eight tranches of Primary Bonds with a total value of up to RM425 million to raise net proceeds of approximately RM380 million. The issuance of the Bonds will take place following the execution of the Share Subscription Agreements, of which payments will be used exclusively to satisfy the principal and profit payments of the Bonds. The payments for the share subscription are scheduled so as to correspond to the scheduled payments of the Bonds in terms of amount and timing. Each installment payment is credited into the Finance Service Reserve Account (FSRA), an account jointly managed by SSHMC and the Facility Agent for the purpose of the Bonds repayment, one month before each scheduled payment of the Bonds which occurs semiannually. With the terms and conditions provided in the Agreements, credit risk and liquidity risk of the Bonds are essentially mitigated.

Given the importance of the project to the state, MARC believes that construction or completion risk is significantly mitigated. The risk is moderated further by the fact that SSHMC is entitled to LAD at the rate of RM50,000 per day, which can be deducted from any monies due to the Contractor as well as recovered from the Performance Bonds.