The Islamic debt ratings of MARC-1ID/AAAID assigned to Putrajaya Holdings Sdn Bhd’s (“PJH”) proposed RM1.5 billion Murabahah Commercial Papers/Medium Term Notes (“CP/MTN”) Programme reflects PJH’s solid capitalization underlined by the strong set of shareholders, exceptionally strong financial flexibility and the strategic importance of PJH in the development of Putrajaya as the nation’s administrative capital. The primary source of repayment for the CP/MTN securities is expected to be by way of the progress payments in respect of the construction of Government Quarters (“GQ”) for Phases II and III.

PJH is the concessionaire and developer of Putrajaya which involves the construction of infrastructure, Government office buildings, GQ, commercial development and certain amenities. Proceeds from this proposed issuance will be mainly utilised towards the construction of GQ units under Phases II and III.

The construction of the GQ units is by way of a Design and Build Agreement (“DBA”) between PJH and the Government of Malaysia (the Government). In this regard, the DBA for Phase II was executed with the Government in April 2003 for a total contract sum of RM1,147.3 million in respect of 4,379 GQ units. Phase III involves the construction of approximately 24,374 GQ units and MARC notes that the total contract sum is presently under negotiation with the Government. The costing structure will be divided into two phases being 3A and 3B of 9,931 and 14,443 GQ units respectively. The costing structure for Phases 3A and 3B was submitted to the Government in the second half of 2005 for consideration. The DBA for Phases 3A and 3B is expected to be executed in 2006.

The contractors for Phase II and III will be governed by a Construction Contract entered into with PJH. Construction works for Phase II commenced in mid-1998 and as at January 2006, 39% of the GQ units have been handed over to the Government. Furthermore, the on-going units are almost 70% completed with full completion expected in 2006. Under Phase III, construction works for Phase 3A had commenced in late 2003, covering about 70% of the GQ units and are presently at various stages of completion. MARC believes that construction risk is significantly mitigated for Phase II in view of the non complex nature of the GQ units and the advanced stage of completion for the remaining units. With regards to Phase III, construction risk is relatively higher due to the early stage of construction and the large volume of units involved though this is moderately mitigated by virtue that the same contractors used for Phase II will be engaged for the said development.

PJH reported a significant improvement in revenue for FY2005 to RM1,319 million and this was attributed mainly to the increased progress billings from the GQ and steady rental contributions from the sub-lease of Government buildings. Following the drawdown of the proposed CP/MTN, PJH’s proforma debt equity level (equity level is based on FY2005’s audited results) is expected to be 3.46x; 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 line of RM736.0 million as at 31 December 2005.