Friday, Nov 21, 2003
The rating of Road Asset Vehicle Sdn Bhd’s (RAV) RM350 million Commercial Paper Programme (CP) has been reaffirmed at MARC-2. The rating 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 sum 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 May 2003, a total of twenty progress certificates with an aggregate value of RM190.5 million, was sold to RAV, representing 50% of the total project cost.
WCT [MARC corporate debt rating: A(s)] is the originator, and the contract holder for the construction of the Guthrie Corridor Expressway. Construction works commenced in October 2001 and was originally scheduled for completion at end September 2003 but has been revised to September 2004. The extension of time was granted due to the late handover of site by GCE. As at May 2003, the expressway was 52% completed (based on physical completion). In the event that the construction period goes beyond the facility availability period, RAV would not be able to drawdown on the facility and payments for the progress certificates will be dealt with separately between WCT and GCE. 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 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. 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 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.
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 May 2003, a total of twenty progress certificates with an aggregate value of RM190.5 million, was sold to RAV, representing 50% of the total project cost.
WCT [MARC corporate debt rating: A(s)] is the originator, and the contract holder for the construction of the Guthrie Corridor Expressway. Construction works commenced in October 2001 and was originally scheduled for completion at end September 2003 but has been revised to September 2004. The extension of time was granted due to the late handover of site by GCE. As at May 2003, the expressway was 52% completed (based on physical completion). In the event that the construction period goes beyond the facility availability period, RAV would not be able to drawdown on the facility and payments for the progress certificates will be dealt with separately between WCT and GCE. 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 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. 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 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.