Vastalux Capital Sdn Bhd - 2007

MARC has reaffirmed the rating of AA- IS on Vastalux Capital Sdn Bhd’s (VCSB) RM100.0 million Sukuk Musyarakah. The rating outlook is stable. The rating reflects the credit strength of payment stream arising from the performance of contracts secured from PCSB. The contracts have tenures and cash flows that match VCSB’s obligations under the Sukuk Musyarakah. Payments from PCSB are captured in a designated account and applied to payment obligations under the Sukuk Musyarakah ahead of operational expenses. The transaction is not insulated from the performance risk associated with the underlying contracts. The rating is therefore moderated by Vastalux’s average business risk profile as an oil and gas services player and its relatively small balance sheet.

VCSB is a special purpose company and wholly-owned subsidiary of Vastalux, incorporated for the purpose of issuing the Sukuk to fund Vastalux’s working capital in relation to two contracts awarded by PCSB, a RM180.0 million Hook-Up and Commissioning (HUC) contract and a RM400.0 million Top-Side Major Maintenance (TMM) contract for onshore and offshore works awarded in 2004 and 2005 respectively. Both contracts are core to VCSB’s ability to fulfil its obligations under the Sukuk Musyarakah. As of July 2007, 32% and 72% of the TMM and HUC contracts were completed respectively, leaving a total outstanding balance of RM342.1 million.

Vastalux is an oil and gas services company which undertakes offshore hook up and commissioning work for domestic exploration and production (E&P) operations. Vastalux’s customers currently include PCSB, Carigali HESS Operating Company (formerly known as Carigali-Triton Operating Company) and Murphy Oil Corporation. Vastalux’s ability to secure new contracts attests to its satisfactory performance of existing contracts. Earnings visibility continues to be evident given a new RM300.0 million HUC contract which was awarded to Vastalux from PCSB in November 2007. The new HUC contract is for a period of three years and has one year plus one year extensions.

Payment proceeds from the HUC and TMM contracts are captured in a proceeds account (PA) which is jointly controlled by the Security Trustee and Facility Agent. Under the terms of the issue structure, 15% of the amount captured in the PA is transferred into a sinking fund account for the purpose of amortising the Sukuk facility. VCSB has met its first serial redemption of the Sukuk Musyarakah due December 24, 2007 amounting to RM25.0 million. The stable outlook reflects MARC’s expectation of minimal performance risk with respect to Vastalux’s ability to complete and execute the long term contracts.

Major Rating Factors

Strengths

• Structural mechanism incorporating a sinking fund build up from specific contracts for scheduled Sukuk payments; and
• Long term contracts from PETRONAS Carigali Sdn Bhd (PCSB) match the tenure of the Sukuk Musyarakah facility.

Challenges/Risks

• Average business and financial risk profile.