Puncak Niaga - Related Debt - 2010 Credit Commentary Report

MARC has revised its ratings on Puncak Niaga (M) Sdn Bhd (PNSB) and related ratings, following a review of the Selangor water sector ratings which was initiated in June 2010. Concurrently, PNSB and its related ratings have been removed from MARCWatch Negative where they were first placed on June 8, 2010.

The two-notch downgrades in PNSB’s senior debt rating on its RM1.02 billion Bai Bithaman Ajil Islamic Debt Securities (BaIDS) to A+ID and subordinated debt ratings on both its RM546.875 million Junior Notes A (A Notes) and RM435.0 million Nominal Value Redeemable Unsecured Bonds (RUB) to A- respectively reflect heightened concerns with respect to its exposure to Syarikat Bekalan Air Selangor Sdn Bhd’s (Syabas) creditworthiness. MARC has equalised PNSB’s long-term debt rating with that of its single offtaker, Syabas, to reflect the rating agency’s view that the water treatment operator’s creditworthiness is constrained by its ability to collect its water receivables from Syabas. MARC believes that PNSB has sufficient liquidity to fund its debt obligations over the next several months, including honouring a put option attached to its RM150 million Series 6 BaIDS in October 2010. However, MARC cautions that PNSB is at risk of not being able to meet its debt repayments on the A Notes by November 2011, barring an improvement in its receivables collection and any other mitigating developments.

Puncak Niaga Holdings Bhd’s (PNHB) RM546.875 million Redeemable Unconvertible Junior Notes with detachable warrants (RUN) which are secured by PNSB’s RM546.875 million A Notes have been downgraded to A- to reflect the rating of the underlying A Notes.

The outlook on all ratings of debt issued by PNSB and PNHB is revised to negative from developing.