Supporting the rating is the guaranteed minimum rental payments to be made by Universiti Industri Selangor (UNISEL). Moderating factors, on the other hand, include construction and completion risks of the university’s main campus, student and staff accommodation, and high initial debt leverage of the issuer.

JNSB is a special purpose vehicle which was awarded a concession by UNISEL, a wholly-owned subsidiary of the Selangor State Government, to build and operate student hostels, staff accommodation, child care centre, student community centre and student centre for the University. At the end of the 20-year concession period, all the buildings will be transferred to UNISEL. As compensation for building and maintaining the buildings, JNSB will receive rental payments for the hostels and the other buildings on a monthly basis over the tenure of the concession. A minimum rental payment of RM22.5 million per annum has been guaranteed by UNISEL; based upon a total of 5000 students and the total space occupied by UNISEL’s staff; that will serve to support the projected revenue base of JNSB as well as the debt servicing capacity of the company.

With its focus on marine related tertiary education UNISEL has been appointed as the anchor consultant for the Selangor Maritime Corridor. Employment opportunities within the corridor will thus be available to the university’s future graduates. Currently, UNISEL has about 2,400 enrolled students and expects the number to grow to over 5,000 by 2005. Besides student fees, UNISEL’s other source of income is in the form of grants from the Selangor State Government, to cover the university’s operational and research & development expenditure.

THG Construction Sdn Bhd (THGC) has been appointed as the turnkey contractor for this project. THGC is a wholly-owned subsidiary of TH Group Berhad (THG), a listed company on the KLSE Main Board with a corporate debt rating of A assigned by MARC. THG has issued a completion guarantee in respect of THGC’s performance obligation under the construction contract; somewhat mitigating completion risk of the buildings. Construction of the university’s main campus is presently being undertaken by Lebar Daun Construction Sdn Bhd (LDCSB), a company under the Lebar Daun Group of companies. The completion date of the main campus has been deferred to June 2005 from the initial date of May 2004.

JNSB’s pro-forma debt leverage after the drawdown of the MUNIF is 5.6x and will increase to 6.7x in the second year. The company’s projected margins (after payment of financing costs) are projected to average at a high 51.4% throughout the tenure of the MUNIF; enabling it to meet any unexpected increases in future operating costs.