MARC has placed the ratings of all its Selangor water sector-related issuances on MARCWatch Negative. The rating action affects the following issuers and issuances:

Syarikat Bekalan Air Selangor Sdn Bhd
RM3.0 billion BBA CP/MTN Programme   - MARC-1ID  / AA-ID

Puncak Niaga (M) Sdn Bhd
RM1,020.0 million BaIDS   - AAID
RM546.875 million Junior Notes A   - A+
RM435.0 million RUBs   - A+

Puncak Niaga Holdings Bhd
RM546.875 million RUN       
with RM109.375 million detachable warrants  - A+

RUN Holding SPV Bhd      
First Series of RM200 million      
under RM500 million CP/MTN Programme  - MARC-1/A+

Syarikat Pengeluar Air Sungai Selangor Sdn Bhd
RM435.0 million Islamic Notes Issuance Master Programme  
(comprising RM385.0 million MMTNs and RM50.0 million MCPs)  - MARC-1ID  / AAID 

Viable Chip (M) Sdn Bhd
RM50.0 million BaIDS (Bank Guaranteed)   - AAAID(bg)
RM150.0 million BaIDS   - A+ID

Titisan Modal (M) Sdn Bhd
RM738.0 million Fixed Rate Serial Bonds   - AA+(S).

MARC is reassessing the Selangor state's water industry risk in light of the continued high level of uncertainty associated with the restructuring of the sector. The MARCWatch placements reflect MARC's immediate credit concerns over the impact of Syabas' continued inability to meet in full its monthly bulk water payment obligations to water treatment operators as a result of the former's unresolved water tariff hike. Syabas’ water tariff hike was scheduled to take place in January 2009 but has been deferred indefinitely. Cash flow issues at the water distributor have created spillover financial and liquidity constraints for the water treatment operators, increasing negative rating pressure on related debt issuances.

MARC believes that the significant hurdles in the restructuring process, in particular protracted negotiations between the Selangor state and water players, do not bode favourably toward attaining a timely and orderly resolution of industry restructuring-related issues. Hence, MARC believes that the constraints on certain water treatment operators to service rated debt will become more acute in the coming quarters as debt service reserves decline and expected revenue and cash flow fall behind earlier projections. The present scenario will also pose foreseeable challenges to covenant compliance.

MARC will adjust the ratings as warranted to incorporate the shortening timeline towards a potential default for the more severely affected issuers and/or covenant breach for others upon completing its review of the aforementioned issuances for potential downgrade.

Contacts:
Sharidan Salleh 03-20902243 / sharidan@marc.com.my;
Khairul Emran Mahmud 03-2090 2278 / emran@marc.com.my;
Sandeep Bhattacharya 03-2090  2247/ sandeep@marc.com.my;