Tirai Impresif Sdn Bhd - 2007

MARC has affirmed the AA- long-term rating of Tirai Impresif Sdn Bhd’s (Tirai) RM100.0 million Medium Term Notes (MTN) Programme with a stable outlook. The affirmation is primarily based on the credit quality and performance of existing Government contract receivables assigned to the issue in respect of identified Government sponsored affordable housing schemes and the issue’s tight structure. The structured finance transaction is insulated from the risk of the originator and parent of Tirai, Vintage Roofing and Construction Sdn Bhd (VRC).

Tirai is a single-purpose entity, wholly owned by VRC; which was set up to facilitate the issuance of the MTN. VRC, the operating arm and a wholly owned subsidiary of listed VTI Vintage Berhad (VVB), undertakes roofing contracts for “Skim Rumah Mampu Milik” (RMM) and “Skim Rumah Mesra Rakyat” (RMR), Government sponsored schemes to develop and construct affordable housing for the lower income group through Syarikat Perumahan Negara Berhad (SPNB). SPNB is a wholly-owned subsidiary of the Minister of Finance Incorporated (MOF). VVB as a group has positioned itself as a total roof solution provider, which involves the manufacture of roof trusses and tiles and the trading, supply and installation of roofing and roofing tiles.

The MTN programme can also be utilised to finance the working capital requirements of contracts awarded by The Government of Malaysia (GOM) to VVB and its subsidiaries. For these other contracts to be eligible for financing under the MTN programme, MARC’s confirmation that these contracts will not negatively affect the rating of the MTN programme is required. As at October 2007, only RM2.0 million MTN has been issued. The low utilisation of the MTN Programme is due to a slowdown in the implementation of the Skim RMM by SPNB.

The tight issue structure eliminates completion risks on the part of VRC in relation to contracts undertaken. Specifically, the drawdown of the MTN is subject to completion of installation works, invoicing which is certified by SPNB and the assignment of the proceeds from these certified invoices to Tirai. The structure also serves to mitigate credit risks of VRC and VVB, with the pledging of Tirai’s shares to note holders as security further protecting note holders’ interests.

Beginning January 2007, receivables under the RMR scheme are no longer eligible receivables under the MTN programme as a result of variations made to original contract terms.

SPNB has thus far demonstrated a timely payment record with payments on assigned contracts being made within the agreed 90 day credit period. Additionally, Tirai will restrict the outflow of funds from the Collection Account 180 days before the expiry of the 2-year MTN.  The Collection Account should therefore be able to withstand any late payment from SPNB of up to 90 days from the end of the 90-day credit period.

The GOM’s commitment to the provision of social housing and SPNB’s central role as the national housing corporation continues to underpin the latter’s creditworthiness. MARC notes that the GOM has reiterated its commitment in improving the country’s public sector housing as evidenced by the higher allocation under the Ninth Malaysia Plan (9MP). The RMM is one of the housing schemes to be continued under the 9MP.