AMAN SUKUK BERHAD - 2016

MARC has affirmed its AAA_IS rating on special purpose vehicle Aman Sukuk Berhad’s (Aman) Islamic Medium-Term Notes (IMTN) programme of up to RM10.0 billion with a stable outlook. The rating reflects the credit strength of the Malaysian government as the sole paymaster of the sublease rental payments that are sufficient to meet the principal and profit payments under the IMTN programme.

Aman is a wholly-owned funding vehicle of Pembinaan BLT Sdn Bhd (PBLT), the developer of 74 projects comprising quarters and facilities for the Polis DiRaja Malaysia (PDRM). The projects, which are located throughout the country, were developed under a build, lease and transfer (BLT) project model. As at end-August 2016, PBLT has fully completed the construction of the 74 projects with a value of RM7.5 billion, of which 73 projects have been awarded with certificates of completion and compliance (CCC). PBLT expects to receive the CCC for the final completed project by end-September 2016.

Upon receipt of the CCCs, PBLT will enter into sublease rental agreements with the Malaysian government. The proceeds from the IMTNs, which are issued in series, are used to acquire sublease rental receivables for the completed projects from PBLT. As the sublease rental payments are paid directly into the respective series’ security accounts, commingling risk is eliminated. The quantum of sublease rentals is also structured to meet the periodic repayment profile of each series for the IMTN issued.

As at end-August 2016, the outstanding IMTNs under the rated programme stood at RM6.3 billion. Aman redeemed RM150.0 million (Series 1) and RM130.0 million (Series 5) notes in February and March 2016 respectively; the redemption of another RM185.0 million (Series 2) will fall due in October 2016. MARC notes that the current cash balance of RM2.0 billion in the company’s security accounts as at end-August 2016 will be sufficient to meet the scheduled payments for the next three years under each series of issuance.

The stable outlook reflects MARC's expectations that the sublease rental stream backing the transaction will continue to be supported by timely receipt of payments from the Malaysian government.

Major Rating Factors

Strengths

• Predictable and sufficient sublease rental payments to meet financial obligations;
• Credit strength of Malaysian government as the sole paymaster; and
• Irrevocability of sublease obligations of the government.