Tuesday, Feb 14, 2006
MARC has placed Jana Niaga Sdn Bhd (JNSB)’s RM100.0 million Murabahah Underwritten Notes Issuance Facility’s (MUNIF) on MARCWatch with a Negative Outlook. The initial ratings at MARC-2 ID for short term and A- ID for long term were assigned in August 2004. The action is based upon the deteriorating cash flow position of JNSB arising from the failure of Universiti Industri Selangor (UNISEL) to meet guaranteed rental payments.
JNSB is a special purpose vehicle which was awarded a 20-year concession by UNISEL, a wholly-owned subsidiary of the Selangor State Government, to build and operate student hostels, staff accommodation, a child care centre, a student community centre and a student centre for the University. At the end of the concession period, all the buildings will be transferred to UNISEL. As compensation for building and maintaining the buildings, JNSB will receive rental payments for the hostels and the other buildings on a monthly basis over the tenure of the concession with a minimum rental payment of RM11.5 million per annum, guaranteed by UNISEL.
In July 2005, the hostel was opened for student registration upon partial completion of the campus and the concession period officially commenced in August 2005. As at November 2005, UNISEL’s main campus had 3,172 enrolled students but JNSB expects the number to grow to over 5,000 by June 2006 upon closure of UNISEL’s City Campus at Shah Alam.
UNISEL has been unable to make timely payments of the guaranteed rental sums to JNSB amounting to approximately RM961,000 per month since the commencement of the concession in August 2005 and as at December 2005, has only managed to pay RM1.42 million to JNSB resulting in a shortfall of RM3.38 million.
The balance in the Debt Service Reserve Account (DSRA) stood at RM3 million as at November 2005, sufficient to service the profit of the commercial papers for six months. While MARC has been informed that arrangements to address the outstanding guaranteed rental payments are being pursued with UNISEL, its outcome cannot be ascertained at this juncture. JNSB’s financial profile is vulnerable to further deterioration in the absence of the minimal guaranteed rental payment by UNISEL.
The negative outlook takes into consideration the liquidity pressure and deteriorating cash flows faced by JNSB that may adversely impact the company’s ability to service its debt obligations as they become due. MARC will continue to monitor the latest developments affecting JNSB and disseminate any subsequent rating implications, if any, in due course.
JNSB is a special purpose vehicle which was awarded a 20-year concession by UNISEL, a wholly-owned subsidiary of the Selangor State Government, to build and operate student hostels, staff accommodation, a child care centre, a student community centre and a student centre for the University. At the end of the concession period, all the buildings will be transferred to UNISEL. As compensation for building and maintaining the buildings, JNSB will receive rental payments for the hostels and the other buildings on a monthly basis over the tenure of the concession with a minimum rental payment of RM11.5 million per annum, guaranteed by UNISEL.
In July 2005, the hostel was opened for student registration upon partial completion of the campus and the concession period officially commenced in August 2005. As at November 2005, UNISEL’s main campus had 3,172 enrolled students but JNSB expects the number to grow to over 5,000 by June 2006 upon closure of UNISEL’s City Campus at Shah Alam.
UNISEL has been unable to make timely payments of the guaranteed rental sums to JNSB amounting to approximately RM961,000 per month since the commencement of the concession in August 2005 and as at December 2005, has only managed to pay RM1.42 million to JNSB resulting in a shortfall of RM3.38 million.
The balance in the Debt Service Reserve Account (DSRA) stood at RM3 million as at November 2005, sufficient to service the profit of the commercial papers for six months. While MARC has been informed that arrangements to address the outstanding guaranteed rental payments are being pursued with UNISEL, its outcome cannot be ascertained at this juncture. JNSB’s financial profile is vulnerable to further deterioration in the absence of the minimal guaranteed rental payment by UNISEL.
The negative outlook takes into consideration the liquidity pressure and deteriorating cash flows faced by JNSB that may adversely impact the company’s ability to service its debt obligations as they become due. MARC will continue to monitor the latest developments affecting JNSB and disseminate any subsequent rating implications, if any, in due course.