Monday, Oct 22, 2001
Malaysian Rating Corporation Berhad (MARC) has reaffirmed Syarikat Perumahan Negara Bhd’s (“SPN”) RM1 Billion Fixed Rate Bond rating at AAA(s). The rating reaffirmation is primarily based on the external enhancement or support in the form of a ‘put option’, provided irrevocably and unconditionally by Petroliam Nasional Bhd (PETRONAS) to the bondholders. The option requires PETRONAS to purchase the 1998/2003 bonds at face value together with the accrued interest thereon, upon the occurrence of an event of default. The rating also reflects PETRONAS’ robust cash flow generation supported by a favourable production profile, strong profitability measures, sound capital structure, significant role in the Malaysian economy and full ownership by the Government of Malaysia.
SPN is wholly owned by the Minister of Finance Inc. and was established for the sole purpose of promoting the development of low cost housing in the country. SPN will essentially develop or purchase the low cost houses, which will then be sold to eligible buyers. As at May 2001, SPN had approved 16 projects worth RM1.68 billion, out of which about 89% comprised of construction of government quarters for military personnel on a joint-venture basis with Lembaga Tabung Angkatan Tentera (LTAT).
MARC believes the provision of adequate and affordable housing for the low-income group will be of primary concern to the government. Low cost housing shortage is most acute in urban areas where demand is highest but land is scarce and expensive. The increase in the price ceiling from RM25,000 to RM42,000 is expected to spur the development of these houses set against the gradual recovery in the residential property subsector.
In its third year of operations, the company’s source of income continued to be interest earned on the proceeds of the bond issue. Moving forward, SPN’s source of income will primarily be the sales proceeds from property development of low cost housing. Sales income is expected to make a significant appearance in the company’s financial statements from year 2002 onwards upon commencement of sales activities in the current financial year.
Refinancing risk associated with the bullet payment structure of the bonds is eliminated by the put option granted by PETRONAS to the bondholders. The presence of PETRONAS as a major sponsor and the Minister of Finance Inc. as shareholder afford SPN with a high degree of financial flexibility. The government’s continued support to this entity is assured given its strategic role in the provision of social housing.
SPN is wholly owned by the Minister of Finance Inc. and was established for the sole purpose of promoting the development of low cost housing in the country. SPN will essentially develop or purchase the low cost houses, which will then be sold to eligible buyers. As at May 2001, SPN had approved 16 projects worth RM1.68 billion, out of which about 89% comprised of construction of government quarters for military personnel on a joint-venture basis with Lembaga Tabung Angkatan Tentera (LTAT).
MARC believes the provision of adequate and affordable housing for the low-income group will be of primary concern to the government. Low cost housing shortage is most acute in urban areas where demand is highest but land is scarce and expensive. The increase in the price ceiling from RM25,000 to RM42,000 is expected to spur the development of these houses set against the gradual recovery in the residential property subsector.
In its third year of operations, the company’s source of income continued to be interest earned on the proceeds of the bond issue. Moving forward, SPN’s source of income will primarily be the sales proceeds from property development of low cost housing. Sales income is expected to make a significant appearance in the company’s financial statements from year 2002 onwards upon commencement of sales activities in the current financial year.
Refinancing risk associated with the bullet payment structure of the bonds is eliminated by the put option granted by PETRONAS to the bondholders. The presence of PETRONAS as a major sponsor and the Minister of Finance Inc. as shareholder afford SPN with a high degree of financial flexibility. The government’s continued support to this entity is assured given its strategic role in the provision of social housing.