Friday, Oct 28, 2005
MARC has assigned an A+ID rating to Sweetwater SPV Sdn Bhd’s (SSPV) proposed RM195 million Bai Bithaman Ajil Islamic Debt Securities (BaIDS). The rating is supported by the operational and financial capability of Syarikat Pengeluar Air Selangor Sdn Bhd (Splash) to upstream dividends to its shareholders, payment of interest on the loan stocks or loan stock redemption as these cashflows will form the sole repayment source of SSPV’s BaIDS. Enhancements provided in the structure include the maintenance of a Reserve Account (which shall be pre-funded from the BaIDS proceeds) to serve as a liquidity buffer to repay BaIDS obligations in case of timing differences in obtaining cash from Splash. Another level of protection comes from the SSPV’s and/or its parent’s undertaking to provide liquidity line for an amount equal to the next one year financing obligation should the cash in the Designated Accounts be insufficient.
SSPV is a special purpose vehicle incorporated as a wholly-owned subsidiary of The Sweet Water Alliance Sdn Bhd (TSWA) to undertake the fund-raising exercise. As part of the security, TSWA’s 30% shareholding in Splash is pledged with the BaIDs holders. SSPV’s characteristics shall conform to bankruptcy remoteness; which include prohibition from engaging in any other business or activity; prohibition from incurring debt other than that necessary for its role in the transaction; restriction on mergers; and consolidation and asset sale.
TSWA has a 40% stake in Syarikat Pengeluar Air Selangor Holdings Berhad (Splash Holdings), the holding company for the concessionaire, Splash which is undertaking the privatization of the operation & maintenance (O&M) of the Phase 1 water treatment facilities at Bukit Badong (SSP1), as well as the construction and O&M of Phase 3 of the Sungai Selangor Water Supply Scheme (SSP3) for 30 years. In return for the supply of the treated water, SPLASH obtains capacity and supply payments from Syarikat Bekalan Air Selangor Sdn Bhd (SYABAS), the privatized company that has taken over the roles of water distribution and tariff collection from Perbadanan Urus Air Selangor Berhad (PUAS) effective from 1 January 2005. Since the repayment source of the BaIDS will come solely from the contribution by Splash, a detailed analysis was conducted on Splash to ascertain the ability of Splash to upstream the cashflows.
The risk of the actual cashflows to TSWA being lower than what is projected would be due to lower actual earnings by Splash or stricter dividend distribution covenant on Splash’s existing bonds. The first issue is related to the performance risk of Splash which, in MARC’s opinion, is manageable, particularly, in the absence of construction risk; the satisfactory track record of Splash’s operations and proven shareholders’ commitment and management credibility in improving the company’s credit profile during a liquidity crunch period. The second risk is mitigated by TSWA’s undertaking to provide liquidity line should the actual cash flows be insufficient to fulfil the BaIDS obligation.
SSPV is a special purpose vehicle incorporated as a wholly-owned subsidiary of The Sweet Water Alliance Sdn Bhd (TSWA) to undertake the fund-raising exercise. As part of the security, TSWA’s 30% shareholding in Splash is pledged with the BaIDs holders. SSPV’s characteristics shall conform to bankruptcy remoteness; which include prohibition from engaging in any other business or activity; prohibition from incurring debt other than that necessary for its role in the transaction; restriction on mergers; and consolidation and asset sale.
TSWA has a 40% stake in Syarikat Pengeluar Air Selangor Holdings Berhad (Splash Holdings), the holding company for the concessionaire, Splash which is undertaking the privatization of the operation & maintenance (O&M) of the Phase 1 water treatment facilities at Bukit Badong (SSP1), as well as the construction and O&M of Phase 3 of the Sungai Selangor Water Supply Scheme (SSP3) for 30 years. In return for the supply of the treated water, SPLASH obtains capacity and supply payments from Syarikat Bekalan Air Selangor Sdn Bhd (SYABAS), the privatized company that has taken over the roles of water distribution and tariff collection from Perbadanan Urus Air Selangor Berhad (PUAS) effective from 1 January 2005. Since the repayment source of the BaIDS will come solely from the contribution by Splash, a detailed analysis was conducted on Splash to ascertain the ability of Splash to upstream the cashflows.
The risk of the actual cashflows to TSWA being lower than what is projected would be due to lower actual earnings by Splash or stricter dividend distribution covenant on Splash’s existing bonds. The first issue is related to the performance risk of Splash which, in MARC’s opinion, is manageable, particularly, in the absence of construction risk; the satisfactory track record of Splash’s operations and proven shareholders’ commitment and management credibility in improving the company’s credit profile during a liquidity crunch period. The second risk is mitigated by TSWA’s undertaking to provide liquidity line should the actual cash flows be insufficient to fulfil the BaIDS obligation.