Konsortium Lapangan Terjaya Sdn Bhd - 2007

MARC has reaffirmed the ratings of A+_ID and MARC-2_ID /A+_ID on Konsortium Lapangan Terjaya Sdn Bhd’s (“KLT”) RM380.0 million Bai Bithaman Ajil Medium Term Notes (“BBA MTN”) and up to RM80.0 million Murabahah Commercial Papers/Medium Term Notes Programme respectively (“MCP/MTN”) (collectively known as “Finance Facilities”). The ratings carry a stable outlook. KLT is the highway concessionaire for the Kuala Lumpur-Putrajaya Highway (“Highway”), the shortest direct route connecting the commercial centre of Kuala Lumpur to the Federal Administrative Centre of Putrajaya.

The ratings reflects the project’s fairly conservative funding structure with a government grant contributing 66% of project costs and the balance coming from the financing facilities (25%) and equity (9%). Other positive rating factors include the near completion stage of the project, the construction of the highway under a fixed price contract, the project’s strong service area fundamentals and an undertaking by Maju Holdings Sdn Bhd (“Maju Holdings”), the contractor and ultimate shareholder, to cover any shortfall in the Finance Service Account (“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 bondholders with adequate protection against cashflow leakages. However, moderating the strengths are the inherent traffic-volume risks faced by the Highway given the presence of alternative routes, and demand elasticity with respect to toll rates.

KLT was awarded a 33-year concession commencing from 6 December 2004 to 6 December 2037 by the Government of Malaysia (“GOM”). As the concessionaire, KLT is responsible for the design, construction, operation, maintenance and management of the Highway and in return, KLT is given the right to collect tolls. The company is 96.83% owned by Bright Focus Berhad, which in turn is wholly owned by Maju Holdings.

Construction of the Highway is divided into three segments. Section I starts from Jalan Tun Razak at the Kampung Pandan Roundabout to Technology Park Malaysia. This segment will be 13km long and consists of an elevated portion 9.1km in length while the remaining is at-grade. Section II spans from Technology Park Malaysia 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 while the construction cost of Section II of the Highway and the development cost of the entire project will be borne by KLT. The total construction and development cost of the Highway is RM1,380 million. The turnkey contractor for this project is Maju Holdings. Risks of cost overruns are mitigated through a fixed-price fixed-period turnkey contract and delay risk has been transferred to Maju Holdings through a back-to-back liquidated ascertained damages (“LAD”) arrangement in the turnkey contract.  As at 31^st May 2007, about 89% of the construction of Section I and 88% of Section II has been completed. The project is expected to reach full completion by December 2007.

The Highway is expected to facilitate traffic dispersal to and from the commercial centre of Kuala Lumpur and serve as a catalyst for the development of the southern corridor of the Klang Valley. The most recent available traffic survey was conducted in July 2005, which resulted in upward revisions to traffic projections relative to the previous survey in October 2003. Toll collection is expected to commence by January 2008.

KLT has commenced servicing profit for the BBA MTN programme of RM18.05 million per annum since January 2006 and RM4.87 million per annum for the MCP/MTN programme since November 2006. The first repayment of the Finance Facilities is due in year 2010 starting with a RM15 million repayment of the MCP/MTN. The repayment of the BBA MTN spreads over nine years, commencing in year 2012, four years after the scheduled opening of the Highway. Finance Service Coverage Ratios (“FSCR”) are adequate for the rating level under base case assumptions with a minimum and average FSCR of 2.93 times and 7.02 times respectively during the tenure of the Finance Facilities.

The outlook for the ratings is stable. Post-completion, the Highway will face ramp-up risk which is common to all start-up toll roads. The underlying service area fundamentals, however, are strong and are expected to moderate traffic volume risks. Nevertheless, there may be pressure on the ratings in the event of persistently low traffic numbers.