MARC has assigned a short term rating of MARC-1ID to Straight A’s Portfolio Sdn Bhd’s (“SAP”) RM200 Million Murabahah Underwritten Notes Issuance Facility (“MUNIF”) with stable outlook.

SAP is a special purpose vehicle (“SPV”) company formed by Oil-Line Engineering & Associates Sdn Bhd (“OLEA”) incorporated for the purpose of securitizing receivables from assigned contracts of OLEA and/or its subsidiaries (“the OLEA Group”).

The issuer, SAP, will purchase the rights to receive cash flows from eligible receivables due from obligors, including the originator’s title and interest therein, originated in the ordinary course of OLEA’s business as an engineering, procurement and construction (“EPC”) services provider. Proceeds from the issuance of Murabahah Notes will be used to purchase receivables at 80% of the contract value, hence providing a collateral cover of 1.25 times. The trustee will then sell the receivables back to SAP at a Murabahah sale price that is equivalent to the principal and profit under the MUNIF.

The rating reflects the following structural protections:

· A collateral cover of 1.25 times at all times for the outstanding issuance;

· Investors are protected against performance risk of the originator, in this transaction – i.e. the service is delivered prior to the creation of the actual receivables;

· The transaction’s strict receivables eligibility criteria should support the quality of the receivables;

· In this transaction, payments on receivables are directed to project accounts jointly managed by OLEA and the transaction trustee and then to a Master Revenue Account (“MRA”) under the control of the trustee. The payment waterfall of the MRA ensures that debt service will be funded ahead of any transfers to the Operating Account; and

· The financial service reserve account (“FSRA”) captures an amount that is equivalent to 100% of the maturing notes at least two weeks prior to the redemption date via transfers from the MRA. OLEA has provided an unconditional and irrevocable corporate guarantee to top up any shortfalls in the reserve fund.

The proposed transaction incorporates serial redemption commencing at the end of 5th year from the initial date of issuance for the MUNIF towards end of the facility tenure at the end of the 7th year. The progressive reduction of the MUNIF reduces the refinancing risk at the final maturity.

OLEA Group has developed from a modest engineering services provider in 1990 to an integrated engineering, procurement and construction (“EPC”) services provider. OLEA Group’s projects in hand as at 31 December 2006 had exceeded RM900 million of which more than RM590 million of works remain outstanding. OLEA’s revenue registered an upward trend from FY2001 to FY2005 at a compounded annual growth rate (“CAGR”) of 37.3% per annum. Its operating profit before interest and tax (“OPBIT”) margin has remained in the double digit territory, averaging 13.9% for the past three years. Based on the unaudited FY2006 results, OLEA registered a total revenue of RM107.2 million with a pre-tax profit arising to RM14.6 million, as a result of a higher share of profits from joint venture companies. OPBIT margin continues to be at double digit of 14.4%. Moving forward, debt leverage of OLEA would be sensitive towards the developments in its orderbook. As at 31 December 2006, the debt-to-equity ratio of OLEA stood at 0.98 times.