MARC has affirmed the ratings of A+ID and MARC-2ID/A+ ID on Konsortium Lapangan Terjaya Sdn Bhd’s (“KLT”) RM380.0 million Bai Bithaman Ajil Medium-Term Notes (“BBA MTN”) and up to RM80.0 million Murabahah Commercial Papers/Medium-Term Notes Programme respectively (“MCP/MTN”) (collectively known as “Finance Facilities”).

The ratings reflect, amongst others, the high level of participation from the Government of Malaysia (“GOM”) in the form of a Government grant totalling RM976.7 million and the government’s full responsibility in land acquisition, signifying the national importance of this project to the development of Putrajaya. Shareholders’ commitment is not limited to only funding, but also the undertaking by Maju Holdings Sdn Bhd (“Maju Holdings”), the largest shareholder and ultimate shareholding company of KLT, to cover any shortfall in the Finance Service Account (“FSA”) if the completion of the Kuala Lumpur-Putrajaya Highway (“Highway”) is delayed by one year due to the fault of KLT. The strict financial covenants under the Finance Facilities provide the bondholders with adequate protection against cashflow leakages. However, moderating the above is the uncertainty surrounding the actual traffic vis-à-vis the projected traffic demand given the presence of alternative routes and the sensitivity of toll users to the toll rates once the Highway is operational.

KLT was awarded the 33-year concession under a Concession Agreement signed on 22 October 1997 with the GOM. As the concessionaire, KLT shall design, construct, operate, maintain and manage the Highway. In return, KLT is given the right to collect toll receipts. The company is 96.83% owned by Bright Focus Sdn Bhd, which in turn is wholly owned by Maju Holdings.

Construction of the Highway is divided into three segments. Section I starts from Jalan Tun Razak at Kampung Pandan Roundabout to Technology Park Malaysia. This segment will be 13km long and consists of an elevated portion of 9.1km in length while the remaining is at-grade. Section II spans from Technology Park Malaysia to Putrajaya. This segment is also 13km long and will be at-grade. The third and last segment is the Putrajaya Link Interchange. Section I and the Putrajaya Link Interchange are Government funded while the construction cost of Section II of the Highway and the development cost of the entire project will be borne by KLT. The total construction and development costs of the Highway is RM1,380 million. The turnkey contractor for this project is Maju Holdings. Risk of cost overrun is mitigated by the fixed-price fixed-period turnkey contract and delay risk has been passed to Maju Holdings through back-to-back liquidated ascertained damages arrangement in the turnkey contract.  As at 30 April 2006, the construction progress was ahead of schedule.  Section I and Section II of the Highway had charted a progress of 41.1% and 45.6% respectively as against the projected schedule of 39.4% and 45.5%. In line with the acceleration of works, the project cost incurred for Section I and Section II reached 41.8% and 47.4% against the budgeted cost of 40.4% and 46.1% respectively. 

The first repayment of the Finance Facilities commences in year 2010 starting with a RM15 million repayment of the MCP/MTN. The repayment of the BBA MTN spreads over nine years, commencing in year 2012, four years after the opening of the Highway. The projected cash flow is expected to be robust given that the base case finance service coverage ratio shows a minimum and average of 3.82x and 13.38x respectively during the tenure of the Finance Facilities.