Tuesday, Mar 25, 2003
MARC has assigned an Islamic corporate debt rating of AAAID (Islamic Debt) to Putrajaya Holdings Sdn Bhd’s (‘PJH’) proposed RM850 million nominal value of Bai Bithaman Ajil (BBA) Serial Bonds Issuance Facility.
Putrajaya Holdings Sdn Bhd’s (‘PJH’) rating reflects its solid capitalization supported by a superior set of shareholders; exceptional financial flexibility; importance of the company in the development of Putrajaya; and an issue structure secured by the specific assignment of the sub-lease rental receivables in respect of the Government buildings, that will form the primary source of redemption of the BBA serial bonds (BBA Bonds).
As the concessionaire and developer of the new Federal Government Administrative Centre at Putrajaya, PJH is responsible for the formulation, planning and implementation of the development activities in Putrajaya. This include the construction of infrastructure, Government office buildings, Government quarters, commercial development and certain amenities. 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 will grant PJH a 25-year lease for the land. PJH will simultaneously sub-lease the land and buildings back to the Government for a matching period of 25 years in return for a specified rental stream, based on predetermined sub-lease rental rates. Maintenance of the buildings will be undertaken and borne entirely by the Government.
The RM850 million nominal value of BBA Bonds will be issued in six (6) series, with maturities ranging between two (2) and twelve (12) years. The BBA Bonds will be issued based on the purchase and sale of landed properties between the joint arrangers and PJH, to facilitate the Islamic principle of BBA.
The main securities for the facility comprise a master assignment over the CA and specific assignments of the rentals receivable by PJH under each sub-lease to be created in favour of the Security Trustee, in respect of Wisma Putra & DPMR and MOF Complex. The construction and completion risks are significantly mitigated as the buildings have been completed and occupied by the respective Government ministries.
Rental proceeds under each sub-lease will be credited into a designated account and will be solely used for the payment of the primary and secondary bonds. The sub-lease rental income streams afford a high degree of stability and predictability to the issue-specific cash flows. As the bonds will be issued before the execution of the sub-lease, PJH will be required to remit funds into a designated account to redeem the BBA Bonds maturing in the next six months, not later than 30 days prior to the said redemption dates. 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 tranches.
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 to 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) was in respect of 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 recent issuance of RM390 million under a CP/MTN programme of up to RM910 million and the proposed BBA Bonds issue 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.
Putrajaya Holdings Sdn Bhd’s (‘PJH’) rating reflects its solid capitalization supported by a superior set of shareholders; exceptional financial flexibility; importance of the company in the development of Putrajaya; and an issue structure secured by the specific assignment of the sub-lease rental receivables in respect of the Government buildings, that will form the primary source of redemption of the BBA serial bonds (BBA Bonds).
As the concessionaire and developer of the new Federal Government Administrative Centre at Putrajaya, PJH is responsible for the formulation, planning and implementation of the development activities in Putrajaya. This include the construction of infrastructure, Government office buildings, Government quarters, commercial development and certain amenities. 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 will grant PJH a 25-year lease for the land. PJH will simultaneously sub-lease the land and buildings back to the Government for a matching period of 25 years in return for a specified rental stream, based on predetermined sub-lease rental rates. Maintenance of the buildings will be undertaken and borne entirely by the Government.
The RM850 million nominal value of BBA Bonds will be issued in six (6) series, with maturities ranging between two (2) and twelve (12) years. The BBA Bonds will be issued based on the purchase and sale of landed properties between the joint arrangers and PJH, to facilitate the Islamic principle of BBA.
The main securities for the facility comprise a master assignment over the CA and specific assignments of the rentals receivable by PJH under each sub-lease to be created in favour of the Security Trustee, in respect of Wisma Putra & DPMR and MOF Complex. The construction and completion risks are significantly mitigated as the buildings have been completed and occupied by the respective Government ministries.
Rental proceeds under each sub-lease will be credited into a designated account and will be solely used for the payment of the primary and secondary bonds. The sub-lease rental income streams afford a high degree of stability and predictability to the issue-specific cash flows. As the bonds will be issued before the execution of the sub-lease, PJH will be required to remit funds into a designated account to redeem the BBA Bonds maturing in the next six months, not later than 30 days prior to the said redemption dates. 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 tranches.
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 to 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) was in respect of 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 recent issuance of RM390 million under a CP/MTN programme of up to RM910 million and the proposed BBA Bonds issue 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.