Tuesday, Oct 05, 2004
The reaffirmation of Kuching Port Authority’s (KPA) Islamic debt securities facility at AAA(s) reflects the strength of the support provided by the State Government of Sarawak in ensuring the timely and full redemption of the BaIDS facility. Hence, the current rating of KPA reflects the credit strength of the state of Sarawak which is superior to KPA’s credit standing.
The strong investment in Sarawak state’s economy has resulted in above-average economic indicators, with 2002 per capita GDP (in 1987 prices) at 1.53x that of Malaysia’s. The state’s economy also seems less vulnerable to economic cycles, registering commendable growth rates from 1990 to 2002. Fiscal policy is expected to be expansionary in the near-term; an expected overall deficit amounting to RM122 million in 2003 compared to a surplus of RM58 million in 2002. The deficit will largely be financed by the state’s cash reserves from previous operating surpluses as well as grants from the Federal Government. Sarawak’s strong financial performance is supported by substantial operating surpluses and manageable fiscal deficits (at less than 10% of total revenue). The state also has relatively low, although rising, level of debt and contingent liabilities.
KPA is currently the Sarawak state’s premier port serving and supporting the state’s economy. The port’s activities are, thus, very much dependent on the economic condition of the state and to some extent the global economy. The number of vessel calls at KPA has been gradually increasing since the decline in 1998. In line with this, cargo throughput also improved gradually, supported by an increase in container and break bulk businesses, which represent more than 80% of the total cargo throughput. KPA’s tariffs remain higher than that of certain other state ports due to its location and distance from the main hub ports in West Malaysia.
KPA’s financial performance improved in FY2003 largely due to a combination of higher revenue and lower financing costs. That aside, we believe that KPA has the support from the state government should the need arises.
Noteholders’ interests are protected through the availability of liquidity/credit support in the transaction structure in the form of revolving credit/overdraft facilities (RC/OD) of an aggregate amount of RM27 million and support from the state government. The RC /OD facilities shall be drawndown to cover any shortfall in funds for the purpose of meeting the redemption of either primary or secondary notes. If the credit facilities have been fully utilized, the state government shall be notified for the necessary arrangements to be made to facilitate the timely and full redemption of the notes under the Islamic debt facility
The strong investment in Sarawak state’s economy has resulted in above-average economic indicators, with 2002 per capita GDP (in 1987 prices) at 1.53x that of Malaysia’s. The state’s economy also seems less vulnerable to economic cycles, registering commendable growth rates from 1990 to 2002. Fiscal policy is expected to be expansionary in the near-term; an expected overall deficit amounting to RM122 million in 2003 compared to a surplus of RM58 million in 2002. The deficit will largely be financed by the state’s cash reserves from previous operating surpluses as well as grants from the Federal Government. Sarawak’s strong financial performance is supported by substantial operating surpluses and manageable fiscal deficits (at less than 10% of total revenue). The state also has relatively low, although rising, level of debt and contingent liabilities.
KPA is currently the Sarawak state’s premier port serving and supporting the state’s economy. The port’s activities are, thus, very much dependent on the economic condition of the state and to some extent the global economy. The number of vessel calls at KPA has been gradually increasing since the decline in 1998. In line with this, cargo throughput also improved gradually, supported by an increase in container and break bulk businesses, which represent more than 80% of the total cargo throughput. KPA’s tariffs remain higher than that of certain other state ports due to its location and distance from the main hub ports in West Malaysia.
KPA’s financial performance improved in FY2003 largely due to a combination of higher revenue and lower financing costs. That aside, we believe that KPA has the support from the state government should the need arises.
Noteholders’ interests are protected through the availability of liquidity/credit support in the transaction structure in the form of revolving credit/overdraft facilities (RC/OD) of an aggregate amount of RM27 million and support from the state government. The RC /OD facilities shall be drawndown to cover any shortfall in funds for the purpose of meeting the redemption of either primary or secondary notes. If the credit facilities have been fully utilized, the state government shall be notified for the necessary arrangements to be made to facilitate the timely and full redemption of the notes under the Islamic debt facility