The reaffirmation of Putrajaya Holdings Sdn Bhd’s (PJH) issuer and Islamic debt ratings are based on the solid capitalization underlined by the formidable set of shareholders and the exceptionally strong financial flexibility. Notwithstanding, it is complemented by the strength of the issue structures where repayment of the corporate debt securities are secured by specific take out sources in the form of assigned sub-lease rental income in respect of specific/identified Government buildings that form the primary source of repayment for the Islamic debt securities issued by the company.

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 and Supplemental Agreement entered into with the Government for the development of Government buildings under Phase 1 and 2 respectively. 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 an annual compounded rate of 3.0% every three years up to certain years and thereafter at a flat rate.

The rating of AAAID for the Bai’ Bithaman Ajil Bonds Facilities reflects the credit of the Government; as the source of repayment are secured against the 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 and the Ministry of Finance. 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 (sub parcel (SP) 1-4) and Precinct 4G3, 4G4 & Putrajaya Convention Centre (PCC) do not have sub-lease agreements, therefore, the RM910 million Murabahah Commercial Papers/Medium Term Notes (CP/MTN) programme and RM1,500 million Murabahah Notes Issuance Facility (MUNIF) reflects the credit risk of PJH which carries an issuer rating of AAA/MARC-1. As at December 2005, the construction works for all sections under Parcel E were fully completed and the Certificate of Practical Completion (CPC) have been issued with exception to SP1 (Block E7). The respective sections’ CPCs’ are expected to be issued by January 2006. 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.

Under the RM1,500 million MUNIF, construction works are fully completed eliminating the construction and completion risks. The facility is essentially unsecured, nevertheless, PJH has pledged not to create any encumbrance over any rights, interest or title in respect of the Government buildings in Precincts 4G1 to 4G4 and PCC without prior approval from the trustee save and except upon the full redemption of the facility.

PJH reported significant improvement for its revenue in FY2005 to approximately RM1,319 million and this is attributed mainly to the increased progress billings from the government quarters and steady rental contributions from the sub-lease of Government buildings. Following the drawdown of the proposed RM2.2 billion Murabahah Islamic Medium Term Notes, out of which RM1.6 billion is expected to be drawndown in 2006, PJH’s proforma debt equity level (equity level is based on FY2005’s audited results) is expected to be 3.17x; still 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 (KLCC (Holdings) Berhad and Khazanah) and an unutilised revolving credit of RM716.0 million as at 30 November 2005.