MARC has assigned ratings of A+ID and MARC-2ID/A+ ID to Konsortium Lapangan Terjaya Sdn Bhd’s (“KLT”) proposed issuance of RM380 million Bai Bithaman Ajil Medium Term Notes (“BBA MTN”) and up to RM80 million Murabahah commercial papers/medium term notes programme respectively (“MCP/MTN”) (“collectively known as Finance Facilities”). Proceeds from the Finance Facilities will be utilised to repay an existing bridging loan; to part finance the construction costs of Section II of the Kuala Lumpur – Putrajaya Highway (“the Highway”), to part finance the development costs of the Highway; to satisfy the requirement to pre-fund the Finance Service Account (“FSA”) during the construction period; payment of the up-front fees and expenses and for working capital requirements.

The assigned ratings reflect, amongst others, the high level of participation from the Government of Malaysia (“GOM”) in the form of a Government grant totalling RM976.7 million and its full responsibility in land acquisition, signifying the national importance of this project to the development of Putrajaya. Shareholders’ commitment is not limited to only funding, but also the undertaking by Maju Holdings Sdn Bhd (“Maju Holdings”), the largest shareholder, to cover any shortfall in the FSA if the completion of the Highway is delayed by one year due to the fault of KLT. The strict financial covenants under the Finance Facilities provide the bond holders with adequate protection against cashflow leakages. However, moderating the above is the uncertainty surrounding the actual traffic vis-à-vis the projected traffic demand given the presence of alternative routes and the sensitivity of toll users to the toll rates once the Highway is operational.

KLT was awarded the 33-year concession under a Concession Agreement signed on 22 October 1997 with the GOM. As the concessionaire, KLT shall manage the operations of the Highway and collect toll receipts. The company is 90.2% owned by Bright Focus Sdn Bhd, which in turn is wholly owned by Maju Holdings. The scope of works to be undertaken
by KLT includes the construction of a 26-km highway stretching from Kuala Lumpur to Putrajaya. The Highway will consist of entry and exit ramps from Jalan Tun Razak and Kampung Pandan Roundabout to and from the Highway; entry ramp from East – West Link to the Highway; entry and exit ramps from Kuchai Lama Interchange, KL – Seremban Highway and New Pantai Highway to and from the Highway; entry and exit ramps from Shah Alam Expressway to and from the Highway; one interchange at Putrajaya Link; two toll plazas and rest and services area.

Construction of the Highway will be divided into three segments. Section I starts from Jalan Tun Razak at Kampung Pandan Roundabout to Technology Park Malaysia. This segment will be 13km long and consists of an elevated portion of 9.1km in length while the remaining is at-grade. Section II spans from Technology Park Malaysia at Bukit Jalil to Putrajaya. This segment is also 13km long and will be at-grade, The third and last segment is the Putrajaya Link Interchange. Section I and the Putrajaya Link Interchange are Government funded stretches while the construction cost of Section II of the Highway will be borne by KLT. The total construction and development costs of the Highway is RM1,380 million. The turnkey contractor for this project is Maju Holdings. Any risk of cost overrun is mitigated to a certain degree by the fixed-price fixed period turnkey contract and delay risk has been passed to Maju Holdings through back-to-back liquidated ascertained damages arrangement in the turnkey contract.

The first repayment of the Finance Facilities commences in year 2010 starting with a RM15 million repayment of the MCP/MMTN. The amortisation of the BBA MTN spreads over nine years, commencing in year 2012, four years after the opening of the Highway. Based on the projected cash flow, KLT’s cash flow is deemed to be robust given that the base case finance service coverage ratio shows a minimum and average of 3.84x and 13.54x respectively during the tenure of the Finance Facilities.