MARC AFFIRMS AAAID/MARC-1ID AND AAAIS RATINGS ON PUTRAJAYA HOLDINGS SDN BHD'S RM8.97 BILLION ISLAMIC DEBT FACILITIES AND PROGRAMMES

Jan 26, 2012 -
MARC has affirmed its AAAID /MARC-1ID and AAAIS ratings on Putrajaya Holdings Sdn Bhd’s (PJH) Islamic debt issuances as follows:-
• RM570 million Bai Bithaman Ajil (BBA) Bonds Issuance Facility (due 2013)
• RM850 million BBA Bonds Issuance Facility (due 2013)
• RM850 million BBA Serial Bonds Issuance Facility (due 2015)
• RM1.5 billion Murabahah Notes Issuance (MUNIF) Facility (due 2015)
• RM2.2 billion Murabahah Medium Term Notes (MMTN) Programme (due 2021)
• RM1.5 billion Murabahah Commercial Papers/Medium Term Notes (CP/MTN) Programme (due 2013)
• RM1.5 billion Sukuk Musyarakah MTN Programme (due 2033).

The outlook for the ratings is stable. The ratings incorporate PJH’s very strong financial profile, characterised by stable and predictable rental income from the government buildings constructed for the Malaysian government under a build-lease-transfer concession. The ratings also take into consideration the strength of the company’s major shareholders, namely, Petroliam Nasional Berhad (Petronas) through KLCC (Holdings) Sdn Bhd and Khazanah Nasional Berhad (Khazanah), to extend timely financial support in the event of need.

In addition, the ratings acknowledge the strong protection afforded by the creation of designated accounts to capture assigned sublease rental streams with regard to the BBA bonds and notes issued under the RM2.2 billion MMTN programme as well as the moderate protection afforded by negative pledge covenants in respect of the remaining rated obligations.

PJH is the lead developer for Putrajaya, the Federal Government Administrative Capital. Since beginning construction in 1996, PJH has completed the construction of specified government buildings and government quarters under the build-lease-transfer concession. The government buildings were fully handed over to the government in 2010 while the government quarters were handed over in December 2011.
The government offices are constructed on land which the Federal Land Commissioner will lease to PJH for a 25-year tenure immediately after the delivery of the buildings. The buildings are subleased back to the government for an identical tenure. The sublease rental payments for the government buildings, which range from RM2.73 psf to RM3.55 psf, provide a steady source of income for PJH. As of September 30, 2011, the lease rentals captured in the security accounts stood at RM340.5 million, which MARC deems to be sufficient to meet PJH’s near-term debt service redemptions totalling RM280.0 million in 2012.

For financial year ending March 31, 2011 (FY2011), PJH’s revenue continued to decline, registering RM1,497 million (FY2010: RM1,751 million), mainly on account of lower construction receivables as its projects reached the tail-end stage of construction. However, profit before tax was boosted to RM740.7 million (FY2010: RM495.0 million) due largely to gains from disposal of Menara PJH and some parcels of commercial land for a total of RM235.5 million.

PJH’s operating cash flow (CFO) generation remains strong at RM1,093 million (FY2010: RM1,070 million), as a result of stable rental income from government buildings. Lower cash outflow from investing and financing activities have also contributed to the overall improvement in PJH’s cash flow profile. However, MARC notes that a one-off high dividend payment of RM396.0 million was made during the year (FY2010: RM40.9 million; FY2009: RM33.0 million).

MARC observes that despite an increase in PJH’s borrowings to RM5,560 million in FY2011 (FY2010: RM5,504 million), its gearing levels declined to 1.18 times (FY2010: 1.21 times) on the back of an increase in shareholders’ funds. The availability of unutilised credit lines of RM1,000 million (excluding undrawn limits of the rated facilities) affords considerable financial flexibility to PJH.
The stable ratings outlook assumes that PJH’s credit metrics with respect to its cash flow coverage would remain consistent with the assigned ratings in the near-to-intermediate term.

Contacts:
Thian Chow Di, +603-2082 2280/ chowdi@marc.com.my;
Rajan Paramesran, +603-2082 2233/ rajan@marc.com.my.