Tuesday, Dec 11, 2001
MARC has assigned an Islamic Debt rating of AA+(s)ID (double A plus, support; Islamic Debt) in respect of Kuching Port Authority’s (KPA) issue of RM180 million Al-Bai Bithaman Ajil Islamic Debt Securities. The rating reflects the strength of the support provided by the State Government of Sarawak (vide its Letter of Support dated 30 November 2001) in ensuring the timely and full redemption of the notes under the said facility.
Kuching port, situated just outside Kuching, the capital city of Sarawak, is currently the state’s premier port serving and supporting the state’s economy. The port’s activities are, thus, very much dependent on the economic condition of the state. The Sarawak state’s economic base is sufficiently diversified with abundant natural resources, such as gas, oil, timber, palm oil and pepper. Its strong financial performance is supported by substantial operating surpluses and manageable fiscal deficits. The state’s balance of trade has consistently been positive throughout the years. But with oil and gas prices currently at low levels, the state’s export proceeds will likely be trimmed in the near term.
The port’s two terminals, namely, Pending and Senari terminals; with annual capacity of 2.9 million tonnes and 6 million tonnes respectively, are located close to several light industrial zones; facilitating the easier movement of cargo. The Pending terminal handles the conventional and ro-ro (motor vehicle) businesses whilst the container business is routed through the Senari terminal.
Kuching port was ranked seventh in the country in terms of container throughput in the year 2000 and earned the distinction of being the first East Malaysian port to handle containers in excess of 100,000 TEUs. The bulk of the port’s cargo throughput (more than 70%) is contributed by the container and break bulk businesses. Container trade has been the port’s main revenue contributor, accounting for more than 50% of aggregate revenue in FY2000. This was followed by the break bulk business (over 30% of revenue), which recorded significant increases in volume and value in FY2000. While revenue has been increasing over the past two fiscal years, the port’s cargo throughput and, consequently, revenue in the near-to-medium term is likely to be adversely impacted by the current global economic slowdown.
Kuching port’s slightly shallower draft compared to certain other federal and state ports in Malaysia places the port at a slight competitive disadvantage by discouraging larger ships from calling at the port. As with the other ports in Sarawak, KPA’s tariffs are higher due to its location and distance from the main hub ports in West Malaysia. Productivity levels, nonetheless, have improved with the introduction of gantry cranes at the Senari terminal. Containers’ turnaround time at the port improved significantly to 17.6 hours as at October 2001 from an average of 32 hours for the year 2000.
Despite the port being profitable at the operational level, such profits have not been sufficient to cover the high financing costs incurred in respect of loans secured for the development of the new terminal at Senari, with KPA incurring losses in its overall financial performance for the past few years. The losses contributed to the Authority’s high debt leverage of 5.48 times in FY2000.
Although KPA’s cash generation is strained by its high financing charges, noteholders’ interests are protected through the availability of liquidity/credit support in the transaction structure in the form of revolving credit/overdraft facilities (RC/OD) of an aggregate amount of RM27.0 million and support from the state government. The RC/OD facilities shall be drawndown to cover any shortfall in funds for the purpose of meeting the redemption of either primary or secondary notes. If the credit facilities have been fully utilized, the state government shall be notified for the necessary arrangement to be made to facilitate the timely and full redemption of the notes under the Islamic debt facility.
Kuching port, situated just outside Kuching, the capital city of Sarawak, is currently the state’s premier port serving and supporting the state’s economy. The port’s activities are, thus, very much dependent on the economic condition of the state. The Sarawak state’s economic base is sufficiently diversified with abundant natural resources, such as gas, oil, timber, palm oil and pepper. Its strong financial performance is supported by substantial operating surpluses and manageable fiscal deficits. The state’s balance of trade has consistently been positive throughout the years. But with oil and gas prices currently at low levels, the state’s export proceeds will likely be trimmed in the near term.
The port’s two terminals, namely, Pending and Senari terminals; with annual capacity of 2.9 million tonnes and 6 million tonnes respectively, are located close to several light industrial zones; facilitating the easier movement of cargo. The Pending terminal handles the conventional and ro-ro (motor vehicle) businesses whilst the container business is routed through the Senari terminal.
Kuching port was ranked seventh in the country in terms of container throughput in the year 2000 and earned the distinction of being the first East Malaysian port to handle containers in excess of 100,000 TEUs. The bulk of the port’s cargo throughput (more than 70%) is contributed by the container and break bulk businesses. Container trade has been the port’s main revenue contributor, accounting for more than 50% of aggregate revenue in FY2000. This was followed by the break bulk business (over 30% of revenue), which recorded significant increases in volume and value in FY2000. While revenue has been increasing over the past two fiscal years, the port’s cargo throughput and, consequently, revenue in the near-to-medium term is likely to be adversely impacted by the current global economic slowdown.
Kuching port’s slightly shallower draft compared to certain other federal and state ports in Malaysia places the port at a slight competitive disadvantage by discouraging larger ships from calling at the port. As with the other ports in Sarawak, KPA’s tariffs are higher due to its location and distance from the main hub ports in West Malaysia. Productivity levels, nonetheless, have improved with the introduction of gantry cranes at the Senari terminal. Containers’ turnaround time at the port improved significantly to 17.6 hours as at October 2001 from an average of 32 hours for the year 2000.
Despite the port being profitable at the operational level, such profits have not been sufficient to cover the high financing costs incurred in respect of loans secured for the development of the new terminal at Senari, with KPA incurring losses in its overall financial performance for the past few years. The losses contributed to the Authority’s high debt leverage of 5.48 times in FY2000.
Although KPA’s cash generation is strained by its high financing charges, noteholders’ interests are protected through the availability of liquidity/credit support in the transaction structure in the form of revolving credit/overdraft facilities (RC/OD) of an aggregate amount of RM27.0 million and support from the state government. The RC/OD facilities shall be drawndown to cover any shortfall in funds for the purpose of meeting the redemption of either primary or secondary notes. If the credit facilities have been fully utilized, the state government shall be notified for the necessary arrangement to be made to facilitate the timely and full redemption of the notes under the Islamic debt facility.