MARC has affirmed the rating of Special Port Vehicle Bhd’s (SPV) RM1,310.0 million nominal amount asset-backed serial bonds facility. The rating affirmation is premised on the superior credit rating of the Government of Malaysia (GOM) backing Port Klang Authority (PKA), the obligor under the transaction; minimal exposure to construction risk with 83.3% of the infrastructure works completed as at 31 May 2004; the national importance of the project evidenced by the letter of support issued by the GOM in favour of the Trustee, Pacific Trustees Berhad; and a protective issue structure which substantially mitigates liquidity risk during the tenure of the facility.

SPV is a special purpose, bankruptcy remote company, incorporated for the purpose of acquiring the future receivables (including interest) amounting to RM1,699.63 million forming the balance consideration price under a Sale and Purchase Agreement (S&P) dated November 2002 between Kuala Dimensi Sdn Bhd (KDSB), the originator and PKA, the obligor. Under the S&P, KDSB is required to undertake land reclamation and infrastructure works including drainage, main access road, bridge and laying of water pipes.

Construction risk is deemed moderate given the technical nature of such works and the considerable reclamation and dredging experience of Wijaya Baru Sdn. Bhd., a Class A PKK contractor. Reclamation works were completed by end December 2003, thus substantially mitigating construction risk. As at 31 May 2004, the overall status of completion was approximately 83.3%. To date, the bulk of infrastructure works i.e. construction of dual carriageway and one of the two bridges spanning 36 metres have been completed. The remaining outstanding works, estimated to cost RM45 million, are expected to be completed by end-2004, within the stipulated 24 months period under the S&P. The cost to be incurred is sufficiently covered by funds in the Infrastructure Reserve Account (IRA), an account specifically for financing the costs of reclamation and infrastructure works, amounting to RM57.4 million as at 31 May 2004.

The Ministry of Transport (MOT) has, vide its letter dated 28th May 2003, confirmed the government’s approved purchase of the land by PKA and development of Port Klang Free Zone/ Transshipment Megahub on the said land and PKA’s obligation to pay the remaining sum over a 15-year period as stipulated in the S&P. Credit risk is considered superior reflecting the government’s backing of PKA to undertake the strategically important project.

Liquidity risk is mitigated through the prefunding of coupons in the coupon service payment account to cover for coupons due and payable during the moratorium period prior to first payment from PKA in June 2007. Liquidity risk arising from unforeseen delays in payments from PKA is mitigated through maintenance of a six months bond servicing reserve in a Finance Service Reserve Account; timing buffer between the projected date of receipts of funds from PKA and the scheduled repayment date of the bonds; and the excess spread between the interest earned on the deferred payment by PKA and interest payable on the bonds.