The reaffirmation of Putrajaya Holdings Sdn Bhd’s (PJH) issuer and Islamic debt ratings reflects the strength of the issue structures which are secured by specific take out sources in the form of assigned sub-lease rental income streams in respect of Government buildings that form the primary source of repayment for the Islamic debt securities issued by the company; the strategic importance of PJH in the development of Putrajaya as the nation’s administrative capital; solid capitalization underlined by the strong set of shareholders and the exceptionally strong financial flexibility.

PJH is the concessionaire and developer of Putrajaya. The construction of Government buildings on a privatized basis by PJH is covered under a Concession Agreement entered into with the Government. Upon completion of the buildings, the Government will grant PJH a 25-year lease for the land. PJH will simultaneously sub-lease the land and buildings back to the Government for a matching period of 25 years in return for specified rental streams. Maintenance of the buildings will be undertaken and borne entirely by the Government. Under the sub-lease agreements, the rental rates will be revised upwards at annual compounded rate of 3.0% every three years.

Under the issue structure, the Bai’ Bithaman Ajil bonds facilities are backed by sub-lease rental payments in respect of completed Government buildings under Parcels A, B Public Facilities Precinct 10; Parcels C & D and Parcels Wisma Putra & the Deputy Prime Minister’s Residence. The rating of AAAID reflects the credit of the Government; the counterparty to the said agreements. Under the issue structure, the sub-lease rental income streams will be captured in designated accounts where it will solely be utilised for the payments of primary and secondary bonds, affording a high degree of stability and predictability to the issue specific cash flows. The progressive reduction of the debts in a serial manner over the tenure of the Facilities significantly mitigates refinancing risk.

Currently, only the Government buildings under Parcel E do not have sub-lease agreements, therefore, the RM910 million Murabahah Commercial Papers/Medium Term Notes (CP/MTN) programme carries the credit risk of PJH which has an issuer rating of AAA/MARC-1. As at October 2004, the construction works for all sections under Parcel E were fully completed and the respective sections are expected to be issued with the Certificate of Practical Completion (CPC) by February 2005. Upon the issuance of the CPCs, the sub-lease agreements will be executed and the rental proceeds shall be assigned toward the redemption of the CP/MTN programme.

PJH’s revenue increased significantly in FY2004 to RM874.6 million on the back of the increase in rental contributions from the sub-lease of Government buildings and project billings. For the current financial year, PJH’s debt to equity ratio is expected to increase slightly to about 2.7x following the draw down of RM1.5 billion under a CP/MTN programme; still manageable and below the cap of 4.0x imposed under the issue structure. PJH’s exceptionally strong financial flexibility is drawn from the strength of its shareholders (PETRONAS and Khazanah) and RM800 million of unutilised revolving credit as at October 2004.