Friday, Dec 22, 2000
MARC has assigned a rating of AA+ID (Double A plus, Islamic Debt) to Anjung Bahasa Sdn Bhd’s (ABSB) RM110.0 million Al-Bai’ Bithaman Ajil Islamic Debt Securities Issuance Facility.
ABSB, a single purpose company, was granted the concession to design, construct and complete a new office complex for Dewan Bahasa dan Pustaka (DBP) on a deferred payment basis, and to undertake the maintenance and management of the building for the 17-year concession period. The rating reflects the absence of construction risks, the stability and predictability of the revenue stream, a protective issue structure which isolates the predetermined monthly payments for the build up of the Finance Service Reserve Account (FSRA) and dividend restriction until a Special Reserve Account (SRA) has been fully funded.
The 1996 Privatization Agreement between the government, DBP and ABSB created a stable and predictable revenue stream comprising the scheduled monthly payment for the office and carpark spaces (representing reimbursement of construction costs) as well as the management and maintenance (M&M) fee, payable monthly in advance by DBP to ABSB. DBP, a statutory body wholly owned by the government and established under the DBP Act 1959 to develop the national language, possesses low credit risk.
Drawdown under the ABBA facility is conditional upon the issuance of the Temporary Certificate of Fitness in respect of the office complex, thereby eliminating construction risk. The issuance of this Certificate will also mark the commencement of the monthly payments and the M&M fees by DBP. Any constructional defects detected during the 12-month defect liability period will ultimately be borne by the project’s turnkey contractor, Visage Engineering Sdn Bhd.
The monthly payments by DBP have been earmarked for the specific purpose of meeting ABSB’s finance service obligations. Such payments will be credited into a FSRA up to the next six months finance service. Only amounts in excess of the FSRA requirement can be applied for other operating expenditure. ABSB’s strong debt service capacity is further underpinned by a RM4.275 million reserve which would be built up over twenty monthly instalments into a SRA. This amount would be sufficient to withstand over two months’ delay in the monthly payments by DBP. In addition, the SRA also provides ample buffer for periods when the monthly payments are insufficient to meet the finance service for any particular six-month period.
Given the stability and predictability of ABSB’s cash flow, MARC views the maintenance of an annual finance service cover ratio (FSCR) of not less than 1.2x as adequate protection to the ABBA note holders. Also, distributions to shareholders are precluded if the FSCR falls below 1.35x after making such payments.
Maintenance expenditure will be covered by the monthly M&M fees payable by DBP. ABSB projects the maintenance expenditure at 60% of the fees. A sum equivalent to 11.5% of the M&M fees will be set aside as maintenance reserve in a separate sinking fund account to meet specified maintenance expenditure. The risk of ABSB breaching its M&M obligations is considered low, as the provision of such services is non-complex in nature.
22 December 2000
ABSB, a single purpose company, was granted the concession to design, construct and complete a new office complex for Dewan Bahasa dan Pustaka (DBP) on a deferred payment basis, and to undertake the maintenance and management of the building for the 17-year concession period. The rating reflects the absence of construction risks, the stability and predictability of the revenue stream, a protective issue structure which isolates the predetermined monthly payments for the build up of the Finance Service Reserve Account (FSRA) and dividend restriction until a Special Reserve Account (SRA) has been fully funded.
The 1996 Privatization Agreement between the government, DBP and ABSB created a stable and predictable revenue stream comprising the scheduled monthly payment for the office and carpark spaces (representing reimbursement of construction costs) as well as the management and maintenance (M&M) fee, payable monthly in advance by DBP to ABSB. DBP, a statutory body wholly owned by the government and established under the DBP Act 1959 to develop the national language, possesses low credit risk.
Drawdown under the ABBA facility is conditional upon the issuance of the Temporary Certificate of Fitness in respect of the office complex, thereby eliminating construction risk. The issuance of this Certificate will also mark the commencement of the monthly payments and the M&M fees by DBP. Any constructional defects detected during the 12-month defect liability period will ultimately be borne by the project’s turnkey contractor, Visage Engineering Sdn Bhd.
The monthly payments by DBP have been earmarked for the specific purpose of meeting ABSB’s finance service obligations. Such payments will be credited into a FSRA up to the next six months finance service. Only amounts in excess of the FSRA requirement can be applied for other operating expenditure. ABSB’s strong debt service capacity is further underpinned by a RM4.275 million reserve which would be built up over twenty monthly instalments into a SRA. This amount would be sufficient to withstand over two months’ delay in the monthly payments by DBP. In addition, the SRA also provides ample buffer for periods when the monthly payments are insufficient to meet the finance service for any particular six-month period.
Given the stability and predictability of ABSB’s cash flow, MARC views the maintenance of an annual finance service cover ratio (FSCR) of not less than 1.2x as adequate protection to the ABBA note holders. Also, distributions to shareholders are precluded if the FSCR falls below 1.35x after making such payments.
Maintenance expenditure will be covered by the monthly M&M fees payable by DBP. ABSB projects the maintenance expenditure at 60% of the fees. A sum equivalent to 11.5% of the M&M fees will be set aside as maintenance reserve in a separate sinking fund account to meet specified maintenance expenditure. The risk of ABSB breaching its M&M obligations is considered low, as the provision of such services is non-complex in nature.
22 December 2000