The affirmation of the ratings reflects Pesaka Astana (M) Sdn Bhd’s (PASB) competitive position as a leading assembler and provider of customized heavy-duty and specialized vehicles for agencies like the Ministry of Defence (MINDEF) and Fire and Rescue Department (BOMBA) and an issue structure that has identified the source of repayment for the ABBA and CP/MTN. These factors are, however, somewhat offset by the company’s high debt leverage position.

PASB has over a decade of experience assembling and customizing heavy-duty and special purpose vehicles for MINDEF. Over the past two years, the company has expanded its list of clientele to include BOMBA, Port Singapore Authority (PSA), Fire & Rescue Department of Brunei Darussalam and the Bangladeshi Government. To date, PASB had been awarded various contracts in excess of RM450 million to assemble various types of heavy duty military vehicles/transporters for MINDEF; fire & rescue vehicles for BOMBA and various other commercial vehicles for corporations.

PASB has completed the contracts amounting to RM150.6 million to supply tactical floating bridges to MINDEF and turn-table ladders to BOMBA; the proceeds of which have been earmarked as the repayment source for the ABBA. The company expects to collect the remaining outstanding amount of the contract within six months after delivery of the vehicles.

The CP/MTN programme, meanwhile, is secured with specific assignments of PASB’s future contracts under which the criteria of the counterparty of the contracts have been predetermined. With the principal counterparties being parties like MINDEF and BOMBA, that is, effectively the Government, credit risk is significantly mitigated.

Proceeds from the contracts will be set aside for debt servicing requirements before meeting operational expenditure. Liquidity risk is further mitigated through the maintenance at all times of funds equivalent to 12 months of secondary bonds and MTN coupon payments. As at 21 December 2004, an amount totalling RM38.7 million was in the Finance Service Reserve Account, sufficient to meet the next 2 profit payments.

For fiscal year ended 31 January 2004, PASB registered an impressive growth of 77.3% from the previous fiscal year, contributed by the progress of the aforementioned contracts and trading of fire fighting equipment. Following the drawdown of the ABBA, PASB’s debt-to-equity (D/E) ratio as at 31 July 2004 increased to 5.4 times, but still below the covenanted level of 8.0 times