MARC has reaffirmed the short term rating of MARC-4ID for Jana Niaga Sdn Bhd’s (JNSB) RM100.0 million Murabahah Underwritten Notes Issuance Facility (MUNIF). The rating continues to reflect JNSB’s significant near-term refinancing risk and diminished credit measures compounded by continuing delays in payment by University Industri Selangor (UNISEL), its sole obligor under its concession to build and operate certain facilities for the Selangor State-owned University. Prospects for improved near-term cash flow remain weak and have severely curtailed JNSB’s refinancing flexibility. MARC has revised the outlook for the rating to developing from negative. The outlook revision stems from JNSB’s improved prospects of obtaining replacement financing for the notes and avoiding payment default when the notes become due in November 2007.
 
In 2004, UNISEL had awarded JNSB a contract to build and operate student hostels, staff accommodation, a child care centre, a student community centre and a student centre for the University. Under the concession agreement (CA) and maintenance agreement (MA), JNSB was to receive approximately RM943,000 in monthly guaranteed rental payments over a 20-year period, post construction completion and approximately RM482,000 as monthly maintenance fees, renewable every five years.

UNISEL continued to delay rental payments in 2007 with outstanding payments totalling RM4.8 million as at end September 2007. Absent refinancing, JNSB’s cash flows would not have been sufficient to repay the notes at maturity irrespective of obligor performance issues. JNSB had originally issued the notes with an intention to refinance the MUNIF at a later date. Failure by UNISEL to meet the guaranteed rental payments and maintenance fee payments in a timely manner has, however, magnified refinancing and default risk in relation to the notes. 

JNSB is in discussions with several financial institutions to refinance the MUNIF ahead of its maturity in November 2007.  The sole note holder, Abrar Discounts Berhad (Abrar), under the management of Prokhas Sdn Bhd (Prokhas) has allowed JNSB until October 2007 to seek refinancing, failing which, Prokhas may convert the MUNIF into a conventional loan. The rating for the notes will be downgraded to DID  on maturity date if payment is missed.