Friday, Sep 03, 2004
MARC has reaffirmed the rating of Road Asset Vehicle Sdn Bhd (RAV) at MARC-2. The rating reflects RAV’s bankruptcy remote status; the corporate guarantee from Kumpulan Guthrie Bhd (the obligor) in respect of the amount payable by Guthrie Corridor Expressway Sdn Bhd (GCE) under the progress certificates; the mitigation of liquidity risk through the maintenance of a reserve sum to cover any funding shortfall and underwriting facility; the credit strength and good track record of the originator/ contractor, WCT Engineering Bhd (WCT); and avoidance of commingling risk through the direct payment arrangement to the SPV of amounts due under the progress certificates.
RAV is a bankruptcy remote, special purpose vehicle set up to acquire interest in receivables, that is, progress certificates of the originator (WCT); funded through the issuance of commercial papers. The progress certificates are sold to RAV on a monthly basis. As at February 2004, a total of twenty nine progress certificates with an aggregate value of RM309.5 million, were sold to RAV, representing 80% of the total project cost of RM386 million.
WCT [MARC corporate debt rating: A(s)] is the originator, and the contract holder for the construction of Guthrie Corridor Expressway. Construction works commenced in October 2001 and were originally scheduled for completion at end September 2003 but was later revised to September 2004. The extension of time was granted due to the late handover of site by GCE. However, the handover of site had taken longer than expected, delaying the completion date to December 2004. As at February 2004, the physical progress was 77.97% in terms of completion. The single obligor cum concession holder is GCE, a wholly owned subsidiary of Kumpulan Guthrie Bhd (Guthrie). A corporate guarantee issued by Guthrie in favour of RAV serves as the credit support for the transaction.
Construction risk is mitigated as the progress certificates sold to the SPV and the issue of commercial papers are on the basis of completed works, thus protecting noteholders from the risk of non-performance or non-completion by WCT. Cost overrun risk is mitigated by the fixed lump sum nature of the Construction Contract. Any cost overrun will be borne entirely by the originator.
Liquidity risk is mitigated as the CPs are fully underwritten. In addition, a reserve sum of RM5.0 million maintained in the Debt Reserve Account (DRA) can be utilized to meet any scheduled payments under the facility in the event of a shortfall in funds.
GCE bears the interest cost on 95% of the amount due under each progress certificate. The interest costs together with project payments will be remitted directly by GCE to the SPV’s project account; avoiding the commingling of the monies with the other assets of the originator. While the project payments will be solely utilized for the repayment of the CPs upon the completion of the project or at the end of the facility period, interest payments by GCE have been earmarked for financing charges under the CPs.
Since the expected completion date falls three months after the maturity of the facility i.e December 2004, GCE will deposit monies for the repayment of the facility into the Project Account by the maturity date of the CPs. According to the issue structure, the maturity date of the CPs shall not go beyond 30th September 2004. As at 6th April 2004, the amount drawndown and outstanding was RM293 million leaving RM57 million as the available limit.
RAV is a bankruptcy remote, special purpose vehicle set up to acquire interest in receivables, that is, progress certificates of the originator (WCT); funded through the issuance of commercial papers. The progress certificates are sold to RAV on a monthly basis. As at February 2004, a total of twenty nine progress certificates with an aggregate value of RM309.5 million, were sold to RAV, representing 80% of the total project cost of RM386 million.
WCT [MARC corporate debt rating: A(s)] is the originator, and the contract holder for the construction of Guthrie Corridor Expressway. Construction works commenced in October 2001 and were originally scheduled for completion at end September 2003 but was later revised to September 2004. The extension of time was granted due to the late handover of site by GCE. However, the handover of site had taken longer than expected, delaying the completion date to December 2004. As at February 2004, the physical progress was 77.97% in terms of completion. The single obligor cum concession holder is GCE, a wholly owned subsidiary of Kumpulan Guthrie Bhd (Guthrie). A corporate guarantee issued by Guthrie in favour of RAV serves as the credit support for the transaction.
Construction risk is mitigated as the progress certificates sold to the SPV and the issue of commercial papers are on the basis of completed works, thus protecting noteholders from the risk of non-performance or non-completion by WCT. Cost overrun risk is mitigated by the fixed lump sum nature of the Construction Contract. Any cost overrun will be borne entirely by the originator.
Liquidity risk is mitigated as the CPs are fully underwritten. In addition, a reserve sum of RM5.0 million maintained in the Debt Reserve Account (DRA) can be utilized to meet any scheduled payments under the facility in the event of a shortfall in funds.
GCE bears the interest cost on 95% of the amount due under each progress certificate. The interest costs together with project payments will be remitted directly by GCE to the SPV’s project account; avoiding the commingling of the monies with the other assets of the originator. While the project payments will be solely utilized for the repayment of the CPs upon the completion of the project or at the end of the facility period, interest payments by GCE have been earmarked for financing charges under the CPs.
Since the expected completion date falls three months after the maturity of the facility i.e December 2004, GCE will deposit monies for the repayment of the facility into the Project Account by the maturity date of the CPs. According to the issue structure, the maturity date of the CPs shall not go beyond 30th September 2004. As at 6th April 2004, the amount drawndown and outstanding was RM293 million leaving RM57 million as the available limit.