Monday, Jan 03, 2005
MARC has reaffirmed the long term rating of A on Puncak Niaga Holdings Berhad’s (PNHB) RM546.875 million Redeemable Unconvertible Junior Notes (RUN) with detachable warrants. The rating is similar to the rating of Puncak Niaga (M) Sdn Bhd’s Junior Notes A (A notes), which has also been reaffirmed. The rating reaffirmation is a reflection of the perfected security interest of the RUN where it is secured on a one-to-one basis against the A notes. Debt service obligations of the A notes match the debt service obligations of the RUN and payments will flow into an escrow account. The rating also reflects the notching down of the junior debt vis-à-vis the senior debts due to the relatively high proportion of senior and secured debts ranking ahead of the junior debt in the event of liquidation.
PNHB is the holding company of PNSB, the operator of 28 water treatment plants (WTPs) in Selangor and Federal Territory under the Privatisation Cum Concession Agreement and Construction Cum Operations Agreement. As the concession holder, PNSB is required to sell treated water to the Selangor State Government until 31 December 2020 under a minimum ‘take-or-pay’ structure.
MARC considers the issue structure of the junior notes as providing adequate protection to the note holders. Under the issue structure, payments made by PNSB under the A notes will be channelled into a specific security account. PNHB would then use the proceeds to service its coupon and principal payments under the RUN. The security account is charged to the RUN holders. The Junior Notes which have a 15-year tenure also incorporate a put option allowing PNHB the right to put the A notes to PNSB at Year 10, thus accelerating the repayment of the principal amount outstanding at the put date, should the holders of the RUN exercise their put options on PNHB. Aside from the put option, the RUN also has a call option which allows PNHB the right to call back all the outstanding RUN at the call date.
The recent announcement made by the Ministry of Energy, Water and Communications that the water privatisation exercise in Selangor and the Federal Territories of Kuala Lumpur and Putrajaya will proceed even before the formation of the National Water Service Commission, is a step forward in solving the financial woes faced by Perbadanan Urus Air Selangor Berhad (PUAS) and tackling the high level of non-revenue water. MARC expects the long awaited water privatization exercise would help to address concerns regarding the rising trade receivables owing by PUAS.
PNHB is the holding company of PNSB, the operator of 28 water treatment plants (WTPs) in Selangor and Federal Territory under the Privatisation Cum Concession Agreement and Construction Cum Operations Agreement. As the concession holder, PNSB is required to sell treated water to the Selangor State Government until 31 December 2020 under a minimum ‘take-or-pay’ structure.
MARC considers the issue structure of the junior notes as providing adequate protection to the note holders. Under the issue structure, payments made by PNSB under the A notes will be channelled into a specific security account. PNHB would then use the proceeds to service its coupon and principal payments under the RUN. The security account is charged to the RUN holders. The Junior Notes which have a 15-year tenure also incorporate a put option allowing PNHB the right to put the A notes to PNSB at Year 10, thus accelerating the repayment of the principal amount outstanding at the put date, should the holders of the RUN exercise their put options on PNHB. Aside from the put option, the RUN also has a call option which allows PNHB the right to call back all the outstanding RUN at the call date.
The recent announcement made by the Ministry of Energy, Water and Communications that the water privatisation exercise in Selangor and the Federal Territories of Kuala Lumpur and Putrajaya will proceed even before the formation of the National Water Service Commission, is a step forward in solving the financial woes faced by Perbadanan Urus Air Selangor Berhad (PUAS) and tackling the high level of non-revenue water. MARC expects the long awaited water privatization exercise would help to address concerns regarding the rising trade receivables owing by PUAS.