Tuesday, Aug 05, 2003
Malaysian Rating Corporation Berhad (MARC) has assigned a long-term rating of AAA (triple A) to Special Port Vehicle Berhad’s (SPV) RM1,310 million nominal amount Asset Backed Serial Bonds (ABS) facility.
Under this transaction, a bankruptcy remote special purpose company, Special Port Vehicle Berhad, will acquire the future receivables (including interest) amounting to RM1,699.63 million forming the balance consideration price under a November 2002 Sale & Purchase (S&P) Agreement between Kuala Dimensi Sdn Bhd (“KDSB”), the Originator and Port Klang Authority (“PKA”), the Obligor. The S&P is in respect of the Government-approved purchase of a 999.5 acre land by PKA, earmarked for development into a Mega Distribution Hub to enhance the port’s transhipment trade. The national importance of the project is evidenced by the letter of support issued by the Government. Credit risk is thus considered superior (AAA) reflecting the Government’s backing of PKA, a statutory authority, to undertake the project.
The disbursement of the bond proceeds for the purpose of purchasing the rights to the balance of receivables under the S&P amounting to RM833.4 million is conditional upon the certified completion of reclamation works at the port, thus limiting bondholders’ exposure to such works. The balance of the reclamation works of which approximately 61% has been fully completed, are expected to take 16 weeks and will be financed by monies in an Infrastructure Reserve Account. Within a period of 24 months, KDSB is also required under the S&P to undertake to complete the balance of infrastructure works (valued at approximately RM55 million), including drainage, main access road etc. Construction risk is largely mitigated given the moderate technical nature of such works; experience of the appointed sub-contractor, Wijaya Baru Sdn Bhd; letter of undertaking to be provided by KDSB; and the setting aside of funds in a separate infrastructure Reserve Account to finance the costs of reclamation and infrastructure works (including provision for cost overruns).
During the four-year moratorium period before commencement of payments by PKA i.e. in year 2007, the SPV’s interest servicing obligation will be covered by funds prefunded out of the bond proceeds. Liquidity risk under the transaction structure, arising from unforeseen delays in payments by PKA is mitigated through the maintenance of a six months bond servicing reserve in a Finance Service Reserve Account; a three-month timing buffer between the projected date of receipt of funds from PKA and the scheduled repayment date of the bonds; and the excess spread between the interest earned on the deferred payment by PKA and interest payable on the bonds.
Under this transaction, a bankruptcy remote special purpose company, Special Port Vehicle Berhad, will acquire the future receivables (including interest) amounting to RM1,699.63 million forming the balance consideration price under a November 2002 Sale & Purchase (S&P) Agreement between Kuala Dimensi Sdn Bhd (“KDSB”), the Originator and Port Klang Authority (“PKA”), the Obligor. The S&P is in respect of the Government-approved purchase of a 999.5 acre land by PKA, earmarked for development into a Mega Distribution Hub to enhance the port’s transhipment trade. The national importance of the project is evidenced by the letter of support issued by the Government. Credit risk is thus considered superior (AAA) reflecting the Government’s backing of PKA, a statutory authority, to undertake the project.
The disbursement of the bond proceeds for the purpose of purchasing the rights to the balance of receivables under the S&P amounting to RM833.4 million is conditional upon the certified completion of reclamation works at the port, thus limiting bondholders’ exposure to such works. The balance of the reclamation works of which approximately 61% has been fully completed, are expected to take 16 weeks and will be financed by monies in an Infrastructure Reserve Account. Within a period of 24 months, KDSB is also required under the S&P to undertake to complete the balance of infrastructure works (valued at approximately RM55 million), including drainage, main access road etc. Construction risk is largely mitigated given the moderate technical nature of such works; experience of the appointed sub-contractor, Wijaya Baru Sdn Bhd; letter of undertaking to be provided by KDSB; and the setting aside of funds in a separate infrastructure Reserve Account to finance the costs of reclamation and infrastructure works (including provision for cost overruns).
During the four-year moratorium period before commencement of payments by PKA i.e. in year 2007, the SPV’s interest servicing obligation will be covered by funds prefunded out of the bond proceeds. Liquidity risk under the transaction structure, arising from unforeseen delays in payments by PKA is mitigated through the maintenance of a six months bond servicing reserve in a Finance Service Reserve Account; a three-month timing buffer between the projected date of receipt of funds from PKA and the scheduled repayment date of the bonds; and the excess spread between the interest earned on the deferred payment by PKA and interest payable on the bonds.