Thursday, Oct 04, 2001
Malaysian Rating Corporation Berhad (MARC) has reaffirmed Setia Putrajaya Sdn Bhd’s (Setia Putrajaya) ratings of MARC-2ID / A+ID and MARC-2ID for its RM375 million Murabahah Notes Issuance Facility/Medium Term Notes and RM170 million Murabahah Notes Issuance Facility respectively.
The ratings reaffirmation reflect Setia Putrajaya’s manageable construction risk given its ability to complete its construction works in a timely manner; the en-bloc sale of the bulk of residential units in Precinct 9 to Putrajaya Holdings Sdn Bhd (Putrajaya Holdings); strong shareholder support afforded by SP Setia Bhd (SP Setia) in terms of resources and expertise; the sinking fund mechanism created to capture progress payments from Putrajaya Holdings; and Setia Putrajaya’s improved financial performance. The ratings are, however, moderated by the heavy debt burden that continues to weigh down the company’s overall financial position.
The company holds the construction contracts in respect of two key government buildings and the residential and commercial properties under Precinct 9. Construction of the government buildings, which were completed in 1999, was partly financed by the RM375 million Murabahah Notes Issuance Facility (1998 – 2001). Phases 1A and 1B under Precinct 9 have also been completed and handed over to Putrajaya Holdings. Works are currently focused on Phase 2 of the same precinct. In the medium term, the revenue driver will be the development of Phase 3 under Precinct 9.
A total of 6,958 units of low and medium-cost houses will be developed under Precinct 9. About 70% of the total residential units will be acquired by Putrajaya Holdings (rated AAA) on behalf of the government for its employees. The en-bloc sale to Putrajaya Holdings substantially mitigates both market and credit risks associated with the project. Demand for the small portion of public units is strong, reflective of the demand for property in Putrajaya.
Progress payments made by Putrajaya Holdings have been specifically earmarked under the issue structure as the source of funds for the redemption of both the Islamic facilities. Setia Putrajaya had, as at July 2001, redeemed and cancelled RM330 million face value of the RM375 million MuNIF/MTN facility. The final maturity of the facility is in November 2001. The RM170 million MuNIF notes issued to finance the development of phases 1B & 2 of Precinct 9 are still outstanding with a sinking fund balance of RM91.0 million as at July 2001.
Setia Putrajaya’s revenue shrank 80.8% to RM141.84 million in FY2000 after the completion of the key government buildings in 1999. Operating cost similarly fell, but by a larger percentage (83.5%) compared to revenue; lifting operating profit margin to 16.6% from 3.3% previously. Debt servicing capacity is somewhat protected under the issue structure through the creation of sinking fund accounts to capture progress payments from Putrajaya Holdings. Setia Putrajaya’s debt leverage rose to 4.7 times in FY2000 from 3.9 times following the issue of notes under the RM170 million Murabahah facility in that fiscal year.
The ratings reaffirmation reflect Setia Putrajaya’s manageable construction risk given its ability to complete its construction works in a timely manner; the en-bloc sale of the bulk of residential units in Precinct 9 to Putrajaya Holdings Sdn Bhd (Putrajaya Holdings); strong shareholder support afforded by SP Setia Bhd (SP Setia) in terms of resources and expertise; the sinking fund mechanism created to capture progress payments from Putrajaya Holdings; and Setia Putrajaya’s improved financial performance. The ratings are, however, moderated by the heavy debt burden that continues to weigh down the company’s overall financial position.
The company holds the construction contracts in respect of two key government buildings and the residential and commercial properties under Precinct 9. Construction of the government buildings, which were completed in 1999, was partly financed by the RM375 million Murabahah Notes Issuance Facility (1998 – 2001). Phases 1A and 1B under Precinct 9 have also been completed and handed over to Putrajaya Holdings. Works are currently focused on Phase 2 of the same precinct. In the medium term, the revenue driver will be the development of Phase 3 under Precinct 9.
A total of 6,958 units of low and medium-cost houses will be developed under Precinct 9. About 70% of the total residential units will be acquired by Putrajaya Holdings (rated AAA) on behalf of the government for its employees. The en-bloc sale to Putrajaya Holdings substantially mitigates both market and credit risks associated with the project. Demand for the small portion of public units is strong, reflective of the demand for property in Putrajaya.
Progress payments made by Putrajaya Holdings have been specifically earmarked under the issue structure as the source of funds for the redemption of both the Islamic facilities. Setia Putrajaya had, as at July 2001, redeemed and cancelled RM330 million face value of the RM375 million MuNIF/MTN facility. The final maturity of the facility is in November 2001. The RM170 million MuNIF notes issued to finance the development of phases 1B & 2 of Precinct 9 are still outstanding with a sinking fund balance of RM91.0 million as at July 2001.
Setia Putrajaya’s revenue shrank 80.8% to RM141.84 million in FY2000 after the completion of the key government buildings in 1999. Operating cost similarly fell, but by a larger percentage (83.5%) compared to revenue; lifting operating profit margin to 16.6% from 3.3% previously. Debt servicing capacity is somewhat protected under the issue structure through the creation of sinking fund accounts to capture progress payments from Putrajaya Holdings. Setia Putrajaya’s debt leverage rose to 4.7 times in FY2000 from 3.9 times following the issue of notes under the RM170 million Murabahah facility in that fiscal year.