Thursday, Jan 19, 2006
The long term rating of Puncak Niaga Holdings Berhad’s (“PNHB”) RM546.875 million Redeemable Unconvertible Junior Notes (“RUN”) with detachable warrants has been reaffirmed at A. The rating is similar to the rating of Puncak Niaga (M) Sdn Bhd’s (“PNSB”) Junior Notes A (“A Notes”), which has also been reaffirmed. The rating reaffirmation is a reflection of the perfected security interest of the RUN where it is secured on a one-to-one basis against the A Notes. Under the Issue Structure, debt service obligations of the A Notes match the debt service obligations of the RUN and payments will flow into an escrow account. The rating also reflects the notching down of the junior debt vis-à-vis the senior debts due to the existence of senior and secured debts ranking ahead of the junior debt in the event of liquidation.
On 19 October 2005, the PNSB’s senior debt holders gave their consent to PNSB to extend the tenures of the RM1.02 billion Bai Bithaman Ajil Islamic Debt Securities (“BaIDS”). The proposal to vary the existing principal terms and conditions allows the holders the opportunity to call for an early repayment under the Put Option granted to the holders by PNSB. The extension of the tenures of the BaIDS would place the A Notes holders and therefore the RUN holders in a better position in the form of a favourable cash flow position that would likely alleviate the liquidity risk of the RUN as compared against its liquidity risk in the previous structure of the BaIDS. If the Put Options on Series 3, 4, 5 and 6 of the BaIDS are exercised in FY2007, FY2008, FY2009 and FY2010 respectively; the Debt Service Cover Ratio (DSCR) is projected to be 2.12x, well above the covenanted level of 1.25x with sufficient cash balance to redeem the RUN should the holders exercise the Put Option.
Under stressed operating conditions, the DSCR ratio would still comfortably meet the minimum DSCR requirement. Underpinning the cash flow’s resilience is the privatisation of Perbadanan Urus Air Selangor Bhd (“PUAS”) to Syarikat Bekalan Air Selangor Sdn Bhd (“SYABAS”) whose operations and responsibilities have been taken over by SYABAS in FY2005. This has led to considerable improvement in PNSB’s collections from receivables and the resolution of old outstanding trade receivables owed by PUAS. Complementing this exercise is the built-in rate adjustment mechanism within the concession agreements and the take-or-pay arrangement with the new privatisation vehicle.
On 19 October 2005, the PNSB’s senior debt holders gave their consent to PNSB to extend the tenures of the RM1.02 billion Bai Bithaman Ajil Islamic Debt Securities (“BaIDS”). The proposal to vary the existing principal terms and conditions allows the holders the opportunity to call for an early repayment under the Put Option granted to the holders by PNSB. The extension of the tenures of the BaIDS would place the A Notes holders and therefore the RUN holders in a better position in the form of a favourable cash flow position that would likely alleviate the liquidity risk of the RUN as compared against its liquidity risk in the previous structure of the BaIDS. If the Put Options on Series 3, 4, 5 and 6 of the BaIDS are exercised in FY2007, FY2008, FY2009 and FY2010 respectively; the Debt Service Cover Ratio (DSCR) is projected to be 2.12x, well above the covenanted level of 1.25x with sufficient cash balance to redeem the RUN should the holders exercise the Put Option.
Under stressed operating conditions, the DSCR ratio would still comfortably meet the minimum DSCR requirement. Underpinning the cash flow’s resilience is the privatisation of Perbadanan Urus Air Selangor Bhd (“PUAS”) to Syarikat Bekalan Air Selangor Sdn Bhd (“SYABAS”) whose operations and responsibilities have been taken over by SYABAS in FY2005. This has led to considerable improvement in PNSB’s collections from receivables and the resolution of old outstanding trade receivables owed by PUAS. Complementing this exercise is the built-in rate adjustment mechanism within the concession agreements and the take-or-pay arrangement with the new privatisation vehicle.