Monday, Aug 08, 2005
Malaysian Rating Corporation Berhad (MARC) has assigned a long term rating of AAAID to Musyarakah One Capital Berhad’s (Musyarakah One) RM103.62 million Sukuk Musyarakah Series 2005-B. This series is the second issuance of a RM2.5 billion Sukuk Musyarakah Programme.
Musyarakah One Capital Berhad (“Musyarakah One”), is a bankruptcy remote special-purpose vehicle incorporated for the purpose of acquiring receivables from time to time from the Originator, TIME Systems Integrators Sdn. Bhd. (“TSI”). Musyarakah One will issue Sukuk Musyarakah for the purpose of the said acquisition. Receivables comprise of rights, title, interests and benefits to the payment obligations of the Government of Malaysia (“GOM”) to TSI pursuant to the contract and letter(s) of award to supply teaching equipment and provision of services to various schools and certain government areas, from time to time and to implement a programme for teaching Science and Mathematics in English.
This issue of Sukuk Musyarakah Series 2005-B is for the purpose of acquisition of receivables arising from supply of certain teaching equipment and services for school year 2005 to all schools in the country and certain designated government areas which was completed on 31 March 2005. Sukuk Musyarakah Series 2005-B will be issued in two tranches to acquire receivables generated from supplies made under the Letter of Award dated 4 November 2004. Under the said letter of award, the GOM had awarded TSI, a wholly-owned subsidiary of TIME Engineering Berhad (“TIME”), with a contract to supply certain teaching equipment and services for school year 2005 to all schools in the country and certain designated government areas. Payment from the GOM will be made on a deferred payment basis (in instalments) as stipulated in the facility payment certificate (“Sijil Utama”). Instalment payments from the GOM in respect of Sukuk Musyarakah Series 2005-B will commence in 2006, one year from the date of issue of Sukuk Musyarakah Series 2005-B. The Sijil Utama represents GOM’s irrevocable and unconditional payment obligations (without set-off, deduction, counterclaims or adjustments) to pay the agreed contract sum in accordance with the schedule in the Sijil Utama.
Performance risk under the proposed issuance is mitigated as receivables are securitised subsequent to delivery, installation, testing and commissioning of teaching equipments. In addition, the GOM does not have the right to set-off any claims against the securitised receivables whereby any claims must be made directly against TSI. As performance risk is mitigated, the Sukuk Musyarakah essentially reflects the superior credit strength of the GOM.
The timing of repayment of each Sukuk Musyarakah has been structured to coincide with the repayment of the GOM under the Sijil Utama. Under the transaction, the investors are essentially the beneficial owners of the receivables. Events of default (EOD) under the programme include amongst others, the failure of GOM to honour its obligations under the Sijil Utama. However, an EOD under the programme does not constitute an EOD under the Sijil Utama and hence payment of amounts not due and payable under the Sijil Utama 2005-B or any other Sijil Utama cannot be accelerated.
Musyarakah One Capital Berhad (“Musyarakah One”), is a bankruptcy remote special-purpose vehicle incorporated for the purpose of acquiring receivables from time to time from the Originator, TIME Systems Integrators Sdn. Bhd. (“TSI”). Musyarakah One will issue Sukuk Musyarakah for the purpose of the said acquisition. Receivables comprise of rights, title, interests and benefits to the payment obligations of the Government of Malaysia (“GOM”) to TSI pursuant to the contract and letter(s) of award to supply teaching equipment and provision of services to various schools and certain government areas, from time to time and to implement a programme for teaching Science and Mathematics in English.
This issue of Sukuk Musyarakah Series 2005-B is for the purpose of acquisition of receivables arising from supply of certain teaching equipment and services for school year 2005 to all schools in the country and certain designated government areas which was completed on 31 March 2005. Sukuk Musyarakah Series 2005-B will be issued in two tranches to acquire receivables generated from supplies made under the Letter of Award dated 4 November 2004. Under the said letter of award, the GOM had awarded TSI, a wholly-owned subsidiary of TIME Engineering Berhad (“TIME”), with a contract to supply certain teaching equipment and services for school year 2005 to all schools in the country and certain designated government areas. Payment from the GOM will be made on a deferred payment basis (in instalments) as stipulated in the facility payment certificate (“Sijil Utama”). Instalment payments from the GOM in respect of Sukuk Musyarakah Series 2005-B will commence in 2006, one year from the date of issue of Sukuk Musyarakah Series 2005-B. The Sijil Utama represents GOM’s irrevocable and unconditional payment obligations (without set-off, deduction, counterclaims or adjustments) to pay the agreed contract sum in accordance with the schedule in the Sijil Utama.
Performance risk under the proposed issuance is mitigated as receivables are securitised subsequent to delivery, installation, testing and commissioning of teaching equipments. In addition, the GOM does not have the right to set-off any claims against the securitised receivables whereby any claims must be made directly against TSI. As performance risk is mitigated, the Sukuk Musyarakah essentially reflects the superior credit strength of the GOM.
The timing of repayment of each Sukuk Musyarakah has been structured to coincide with the repayment of the GOM under the Sijil Utama. Under the transaction, the investors are essentially the beneficial owners of the receivables. Events of default (EOD) under the programme include amongst others, the failure of GOM to honour its obligations under the Sijil Utama. However, an EOD under the programme does not constitute an EOD under the Sijil Utama and hence payment of amounts not due and payable under the Sijil Utama 2005-B or any other Sijil Utama cannot be accelerated.