Thursday, Nov 08, 2001
Malaysian Rating Corporation Berhad (MARC) has affirmed Putrajaya Holdings Sdn Bhd’s (PJH) RM1,109 million Al-Bai Bithaman Ajil (ABBA) Bonds Issuance Facility (Parcels A, B & Public Facilities Precinct 10) (2000-2010) rating at AAAID. The rating affirmation reflects PJH’s solid capitalization supported by a superior set of shareholders; exceptionally strong 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 ABBA 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 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. The sub-lease rental rates are fixed for three consecutive years and then, graduated based on an annual compounded rate of 3% after every third year. Maintenance of the buildings are undertaken and borne by the Government.
The four (4)-series ABBA bonds represent the securitization of PJH’s obligation arising out of the purchase and resale of the rights to the sub-lease rentals in respect of the Government buildings under Parcels A, B and Public Facilities Precinct 10, between the primary subscribers to the issue and PJH. As the bonds were issued after the receipt of the Certificate of Practical Completion for the respective Government buildings and execution of the lease and sub-lease agreements, construction and completion risks are completely eliminated. The main security for the facility takes the form of a master assignment over the CA and specific assignment of the rentals receivable by PJH under each sub-lease, created in favour of the Security Trustee.
Rental proceeds are credited into a designated account and will be solely used for the payment of the primary and secondary bonds. As at 17 August 2001, the credit balance in the designated account stood at RM142.5 million, after the utilization of funds to meet the secondary bond payment in June 2001. The sub-lease rental income stream affords a high degree of stability and predictability to the issue-specific cash flow. 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 facility.
Aided by a 21.7% reduction in operating costs, PJH recorded a profit before tax of RM66.9 million as at FYE 3/2001 (FYE 3/2000: RM85.8 million) despite the decline in revenue, heavier interest burden and reduction in the share of profits of associated companies. Total borrowings increased to RM1.72 billion following the issue of RM1.38 billion of Al-Bai Bithaman Ajil serial bonds during the financial year. Consequently, PJH’s debt-equity ratio rose to 0.75x from 0.61x, moderated by the enlarged shareholders’ funds. The debt leverage ratio is expected to increase further to 1.25x after the full issuance of the RM300 million proposed Murabahah Commercial Paper/Medium Term Notes (2001-2004). This leverage is still manageable and well 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, Khazanah Nasional Bhd (40%), the investment holding company of the Government, and PETRONAS (40%), the national oil and gas company.
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 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. The sub-lease rental rates are fixed for three consecutive years and then, graduated based on an annual compounded rate of 3% after every third year. Maintenance of the buildings are undertaken and borne by the Government.
The four (4)-series ABBA bonds represent the securitization of PJH’s obligation arising out of the purchase and resale of the rights to the sub-lease rentals in respect of the Government buildings under Parcels A, B and Public Facilities Precinct 10, between the primary subscribers to the issue and PJH. As the bonds were issued after the receipt of the Certificate of Practical Completion for the respective Government buildings and execution of the lease and sub-lease agreements, construction and completion risks are completely eliminated. The main security for the facility takes the form of a master assignment over the CA and specific assignment of the rentals receivable by PJH under each sub-lease, created in favour of the Security Trustee.
Rental proceeds are credited into a designated account and will be solely used for the payment of the primary and secondary bonds. As at 17 August 2001, the credit balance in the designated account stood at RM142.5 million, after the utilization of funds to meet the secondary bond payment in June 2001. The sub-lease rental income stream affords a high degree of stability and predictability to the issue-specific cash flow. 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 facility.
Aided by a 21.7% reduction in operating costs, PJH recorded a profit before tax of RM66.9 million as at FYE 3/2001 (FYE 3/2000: RM85.8 million) despite the decline in revenue, heavier interest burden and reduction in the share of profits of associated companies. Total borrowings increased to RM1.72 billion following the issue of RM1.38 billion of Al-Bai Bithaman Ajil serial bonds during the financial year. Consequently, PJH’s debt-equity ratio rose to 0.75x from 0.61x, moderated by the enlarged shareholders’ funds. The debt leverage ratio is expected to increase further to 1.25x after the full issuance of the RM300 million proposed Murabahah Commercial Paper/Medium Term Notes (2001-2004). This leverage is still manageable and well 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, Khazanah Nasional Bhd (40%), the investment holding company of the Government, and PETRONAS (40%), the national oil and gas company.