Friday, Feb 14, 2003
The rating of Road Asset Vehicle Sdn Bhd’s (RAV) RM350 million Commercial Paper Programme (CP) has been affirmed at MARC-2. The rating affirmation reflects the bankruptcy remote status of this special purpose vehicle (SPV); credit support in the form of the assignment of a corporate guarantee issued by Kumpulan Guthrie Bhd (the obligor) in respect of the amount payable by Guthrie Corridor Expressway Sdn Bhd (GCE) under the progress certificates including interest and financing costs; liquidity support provided by the underwriting facility and a reserve to cover any funding shortfall; the credit strength and good track record of the originator, WCT Engineering Bhd (WCT); and avoidance of commingling risk through the direct payment arrangement to the SPV of amounts due under the progress certificates.
The SPV 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 the SPV on a monthly basis. As at August 2002, a total of eleven progress certificates with an aggregate value of RM92.75 million, were sold to RAV, representing 24% of the total project cost.
WCT [MARC corporate debt rating : A-(s)] is the originator, and the contract holder for the construction of Guthrie Corridor Expressway. The expressway will provide infrastructure access to property development within the Guthrie Corridor. Construction works commenced in October 2001 and to be completed in September 2003. Total estimated cost is RM386 million. Payment will be made on a deferred basis. The single obligor cum concession holder is GCE, a wholly owned subsidiary of Kumpulan Guthrie Bhd. A corporate guarantee issued by Guthrie in favour of RAV serves as the credit support for the transaction.
Construction risk is minimal 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. In the event of a premature termination of the contract due to default by WCT, GCE will settle all amounts due under the progress certificates then issued including outstanding financing costs and the proceeds thereof will be utilized to fully settle the CPs outstanding. 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.
The CPs are fully underwritten, with a final maturity set one year after the stipulated completion date of the entire Construction Contract, to accommodate for any delays in construction works. Liquidity risk is also mitigated through the maintenance of a reserve sum in the Debt Reserve Account (DRA), equivalent to RM5.0 million that will be built up during the initial 12-month period of the facility. The reserve can be utilized to meet any scheduled payments under the facility in the event of a shortfall in funds.
GCE will bear 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. As at October 2002, finance cost on rollover of the CPs totalling RM1.20 million was fully covered by interest received from GCE in respect of progress certificates purchased by RAV.
The SPV 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 the SPV on a monthly basis. As at August 2002, a total of eleven progress certificates with an aggregate value of RM92.75 million, were sold to RAV, representing 24% of the total project cost.
WCT [MARC corporate debt rating : A-(s)] is the originator, and the contract holder for the construction of Guthrie Corridor Expressway. The expressway will provide infrastructure access to property development within the Guthrie Corridor. Construction works commenced in October 2001 and to be completed in September 2003. Total estimated cost is RM386 million. Payment will be made on a deferred basis. The single obligor cum concession holder is GCE, a wholly owned subsidiary of Kumpulan Guthrie Bhd. A corporate guarantee issued by Guthrie in favour of RAV serves as the credit support for the transaction.
Construction risk is minimal 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. In the event of a premature termination of the contract due to default by WCT, GCE will settle all amounts due under the progress certificates then issued including outstanding financing costs and the proceeds thereof will be utilized to fully settle the CPs outstanding. 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.
The CPs are fully underwritten, with a final maturity set one year after the stipulated completion date of the entire Construction Contract, to accommodate for any delays in construction works. Liquidity risk is also mitigated through the maintenance of a reserve sum in the Debt Reserve Account (DRA), equivalent to RM5.0 million that will be built up during the initial 12-month period of the facility. The reserve can be utilized to meet any scheduled payments under the facility in the event of a shortfall in funds.
GCE will bear 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. As at October 2002, finance cost on rollover of the CPs totalling RM1.20 million was fully covered by interest received from GCE in respect of progress certificates purchased by RAV.