MARC has reaffirmed Putrajaya Holdings Sdn Bhd’s (PJH) ratings at AAAID for its RM765 million Nominal Value of Bai Bithaman Ajil (BBA) Bonds Issuance Facility (Parcels A, B & Public Facilities Precinct 10) (2000-2010); RM570 million Nominal Value of BBA Bonds Issuance Facility (Parcel C) (2001-2013); RM850 million Nominal Value of BBA Bonds Issuance Facility (Parcel D) (2001-2013); RM850 million nominal value of BBA Serial Bonds Issuance Facility [Parcels Wisma Putra & Deputy  Prime Minister Residence (DPMR) and MOF Complex] (2003 – 2015); and RM1,500 million Murabahah Notes Issuance Facility (MUNIF) [Precinct 4G1-4G4 and Putrajaya Convention Centre (PCC)] (2004/2014) and affirmed PJH’s ratings for its RM2,200 million Nominal Value Murabahah Medium Term Notes Programme (MMTN) (2006/2018); and RM1,500 million Nominal Value Murabahah Commercial Papers and/or Medium Term Notes Programme (MUNIF) [Government Quarters] (2006/2013) at AAAID /MARC-1ID. All the ratings carry a Stable Outlook. The reaffirmation and affirmation of the ratings, are premised on the strength of PJH’s financials and robust cash flows from consistent sub-lease rental collections from a strong off taker i.e. The Government of Malaysia (GOM). 

PJH is the concessionaire and developer of Putrajaya on a privatised basis. Under a Concession and Supplemental agreement entered into with the GOM, PJH is to construct Government Buildings on a privatized basis over two phases. Upon completion of these buildings, the Government will grant PJH a 25-year lease for the land, upon which PJH will simultaneously sub-lease the land and buildings back to the Government for a matching period of 25 years in return for specified rental streams. Maintenance of the buildings will be undertaken and borne entirely by the Government. Under the sub-lease agreements, the rental rates will be revised upwards at an annual compounded rate of 3.0% every three years for a specified period and thereafter at a flat rate. For the contract involving the construction of Government Quarters, PJH will bill the Government progressively for construction work done.

The ratings of the Bai’ Bithaman Ajil Bonds Facilities (BBA Bonds) reflect the credit of the Government, as the source of repayment is secured with the assignment of sub-lease payments by Government for the Government buildings under Parcels A, B, Public Facilities Precinct 10; Parcels C & D and Parcels Wisma Putra, the Deputy Prime Minister’s Residence and the Ministry of Finance. The sub-lease rental income streams will be captured in designated accounts where it will be solely utilised for the payment of primary and secondary bonds, affording a high degree of stability and predictability to the issue specific cash flows. The progressive reduction of the debt in a serial manner over the tenure of the Facilities significantly mitigates refinancing risk.

The ratings of the RM1.5 billion Murabahah Notes Issuance Facility (MUNIF) (Precinct 4G1-4G4 and Putrajaya Convention Centre (PCC)) and the RM1.5 billion Murabahah Commercial Papers and/or Medium Term Notes Programme (Government Quarters) reflect the credit risk of PJH as both of the issues are unsecured. Nevertheless, note holders can take comfort from negative pledges given by PJH for these two issues.

The ratings for the RM2.2 billion Murabahah Medium Term Notes Programme (MMTN) currently reflect the credit risk of PJH. The structure is however strengthened by the future assignment of sub-lease payments from Parcel A, B, C, D and public facilities in Precinct 10 commencing in 2011 after the BBA Bonds have been fully redeemed.

PJH recorded revenue growth of 11.6% to RM1,468.5 million in FY2006 due to higher rental incomes following the execution of sub-lease agreements for Parcel E, MOF Complex and Precinct 4G1-4G2. A reduction in cost of sales has resulted in a significant increase in its operating profit margin to 40.6%. Profit before tax also registered a significant improvement, up 84.7% to RM319.4 million. PJH’s leverage ratio reduced to 2.49x from 2.74x owing to higher shareholders’ funds. The redemption of the RM910 million MCP/MTNs for Parcel E in August 2006 was offset by further draw downs of the RM2.2 billion MMTN and RM1.5 billion MUNIF (Government Quarters) facilities. PJH’s gearing is capped at 4.0x under the various issues.

PJH’s exceptionally strong financial flexibility is drawn from the strength of its ultimate shareholders, PETRONAS and Khazanah, cash balances of RM848.8million as at 30 June 2006 and unutilised credit lines of RM1.33 billion.