Wednesday, May 21, 2003
MARC has affirmed the Islamic corporate debt ratings of AAAID (Islamic Debt) to Putrajaya Holdings Sdn Bhd’s (‘PJH’) RM570 million nominal value Bai Bithaman Ajil (BBA) Bonds Issuance Facility (Parcel C) and RM850 million nominal value BBA Bonds Issuance Facility (Parcel D) respectively.
The affirmation of PJH’s corporate debt ratings reflects its solid capitalization supported by a superior set of shareholders; exceptionally strong financial flexibility; importance of the company in the development of Putrajaya; and an issue structure secured by the specific assignment of the Government’s obligation to make rental payments in respect of the Government buildings, that forms the primary source of repayment for Islamic debt securities issued by the company. The issue structure is further strengthened through the creation of a designated account to hold the rental proceeds; restriction in the utilization of such proceeds for the payment of only the primary and secondary bonds and the specific assignment of the sub-lease rental receivables and designated account in favour of the Trustee.
PJH is the concessionaire and developer of the new Federal Government Administrative Centre at Putrajaya. It is responsible for the formulation and implementation of the planning and development activities in Putrajaya. The construction of Government buildings on a privatized basis by PJH is covered under a Concession Agreement (CA) signed with the Government in June 1999. Upon completion of the buildings, the Government grants PJH a 25-year lease for the land. PJH has simultaneously sub-leased the land and buildings back to the Government for a matching period of 25 years in return for a specified rental stream. The sub-lease rental rates are fixed for three consecutive years and then graduated, based on an annual compounded rate of 3% after every third year. Based on the schedule contained in the sub-lease agreement, the rental payments are made quarterly in advance by the Government.
The two tranches of bonds in 11 maturity series are based on the purchase and sale of the rights to the sub-lease rentals in respect of Parcels C & D, between the primary subscribers to the issue and PJH. The bonds were issued after the receipt of the Certificate of Practical Completion (CPC) for the respective Government buildings, completely eliminating the construction and completion risks. Maintenance of the buildings is undertaken and borne by the Government.
Security for the facilities will take the form of a master assignment over the CA and specific assignment of the rentals receivable under each sub-lease, created in favour of the Security Trustee. Rental proceeds are credited into the respective designated account and will be solely used for the payment of the primary and secondary bonds of the respective tranche. The sub-lease rental income streams afford stability to the cash flow and a comfortable margin of coverage over the respective BBA’s debt servicing requirement. Refinancing risk associated with the payment structure of the bonds is substantially mitigated through the progressive reduction of the total debt size over the tenure of the respective facility.
Progress billings from the sale of development properties and rentals from sub-lease of buildings continued to drive PJH’s revenue in FY2002, making up almost 97% of the RM568.77 million revenue (FY2001: RM580.37 million). Despite a marginal 2% drop in revenue in fiscal year 2002, operating profit margin more than doubled to 27.7% compared to 10.6% in FY2001, attributed by a 28.6% reduction in operating costs. However, a 40.2% increase in interest expense to RM128.26 million (FY2001: RM91.49 million) coupled with a 70.7% reduction in interest income to RM21.40 million (FY2001: RM72.99 million), resulted in a less than one percent growth in PJH’s pre-tax profit to RM67.37 million in FY2002 (FY2001: RM66.85 million). The increase in interest expense was due to the enlarged borrowing base of RM3.14 billion as compared to RM1.72 billion previously, out of which, RM2.25 billion (FY2001: RM1.38 billion) were the outstanding long term BBA serial bonds issues. PJH’s debt leverage is expected to continue to hover below 2.00x in the current financial year after the issuance of RM390 million under a CP/MTN programme of up to RM910 million and BBA Bonds of RM850 million. The ratio is still manageable and below the cap of 4.0x imposed under the issue structure. PJH’s exceptionally strong financial flexibility is drawn from the strength of its shareholders, namely, PETRONAS, the national oil and gas company; and Khazanah Nasional Bhd, the investment holding company of the Government.
The affirmation of PJH’s corporate debt ratings reflects its solid capitalization supported by a superior set of shareholders; exceptionally strong financial flexibility; importance of the company in the development of Putrajaya; and an issue structure secured by the specific assignment of the Government’s obligation to make rental payments in respect of the Government buildings, that forms the primary source of repayment for Islamic debt securities issued by the company. The issue structure is further strengthened through the creation of a designated account to hold the rental proceeds; restriction in the utilization of such proceeds for the payment of only the primary and secondary bonds and the specific assignment of the sub-lease rental receivables and designated account in favour of the Trustee.
PJH is the concessionaire and developer of the new Federal Government Administrative Centre at Putrajaya. It is responsible for the formulation and implementation of the planning and development activities in Putrajaya. The construction of Government buildings on a privatized basis by PJH is covered under a Concession Agreement (CA) signed with the Government in June 1999. Upon completion of the buildings, the Government grants PJH a 25-year lease for the land. PJH has simultaneously sub-leased the land and buildings back to the Government for a matching period of 25 years in return for a specified rental stream. The sub-lease rental rates are fixed for three consecutive years and then graduated, based on an annual compounded rate of 3% after every third year. Based on the schedule contained in the sub-lease agreement, the rental payments are made quarterly in advance by the Government.
The two tranches of bonds in 11 maturity series are based on the purchase and sale of the rights to the sub-lease rentals in respect of Parcels C & D, between the primary subscribers to the issue and PJH. The bonds were issued after the receipt of the Certificate of Practical Completion (CPC) for the respective Government buildings, completely eliminating the construction and completion risks. Maintenance of the buildings is undertaken and borne by the Government.
Security for the facilities will take the form of a master assignment over the CA and specific assignment of the rentals receivable under each sub-lease, created in favour of the Security Trustee. Rental proceeds are credited into the respective designated account and will be solely used for the payment of the primary and secondary bonds of the respective tranche. The sub-lease rental income streams afford stability to the cash flow and a comfortable margin of coverage over the respective BBA’s debt servicing requirement. Refinancing risk associated with the payment structure of the bonds is substantially mitigated through the progressive reduction of the total debt size over the tenure of the respective facility.
Progress billings from the sale of development properties and rentals from sub-lease of buildings continued to drive PJH’s revenue in FY2002, making up almost 97% of the RM568.77 million revenue (FY2001: RM580.37 million). Despite a marginal 2% drop in revenue in fiscal year 2002, operating profit margin more than doubled to 27.7% compared to 10.6% in FY2001, attributed by a 28.6% reduction in operating costs. However, a 40.2% increase in interest expense to RM128.26 million (FY2001: RM91.49 million) coupled with a 70.7% reduction in interest income to RM21.40 million (FY2001: RM72.99 million), resulted in a less than one percent growth in PJH’s pre-tax profit to RM67.37 million in FY2002 (FY2001: RM66.85 million). The increase in interest expense was due to the enlarged borrowing base of RM3.14 billion as compared to RM1.72 billion previously, out of which, RM2.25 billion (FY2001: RM1.38 billion) were the outstanding long term BBA serial bonds issues. PJH’s debt leverage is expected to continue to hover below 2.00x in the current financial year after the issuance of RM390 million under a CP/MTN programme of up to RM910 million and BBA Bonds of RM850 million. The ratio is still manageable and below the cap of 4.0x imposed under the issue structure. PJH’s exceptionally strong financial flexibility is drawn from the strength of its shareholders, namely, PETRONAS, the national oil and gas company; and Khazanah Nasional Bhd, the investment holding company of the Government.