RAM Ratings reaffirms AAA and P1 ratings of Pengurusan Air SPV Berhad’s sukuk

Published on 20 December 2012

RAM Ratings has reaffirmed the respective long- and short-term ratings of AAA (with a stable outlook) and P1 for Pengurusan Air SPV Berhad’s (“PASB”) RM20 billion Islamic Medium-Term Notes Programme (2009/2039) (“IMTN”) and RM20 billion Islamic Commercial Papers Programme (2009/2016) (“ICP”). The IMTN and ICP Programmes (with a combined limit of RM20 billion in nominal value) are collectively referred to as “the Sukuk”.

PASB is a special-purpose vehicle set up as a wholly owned subsidiary of Pengurusan Aset Air Berhad (“PAAB”), to undertake the financing of the latter’s acquisition of water assets and their accompanying liabilities in Peninsular Malaysia and the Federal Territory of Labuan, as well as for the financing of the subsequent development of water infrastructure in the states involved. PAAB and PASB are collectively referred to as “the Group”.

Under the transaction structure, the Sukuk holders’ recourse to PAAB is recognised via an irrevocable and unconditional Purchase Undertaking Deed. Through this document, PAAB (as the obligor) undertakes to purchase the trust assets from the issuer upon maturity, the declaration of a dissolution event or early dissolution, at a price equal to the exercise price. As such, the ratings of the Sukuk reflect PAAB’s credit risk; we thus view the Group in aggregate from a credit perspective.

The ratings reflect the strategic importance of PAAB’s role under the Water Services Industry Act 2006, to restructure the water-services industry by consolidating ownership and responsibility in funding the water assets in Peninsular Malaysia and Labuan. For these purposes, RAM Ratings views PAAB – a whole owned subsidiary of the Government – to be operating on a non-commercial basis and reliant on external funding almost exclusively, backed by the implicit support of the Government. As such, the credit risk of PAAB mirrors that of the Government. On this note, the Government’s support is underlined by its guarantee on PASB’s additional RM20 billion IMTN Programme (“GG Programme”); the first issue under this facility took place in February 2011. To date, a respective RM1.78 billion and RM9.5 billion from the Sukuk and the GG Programme remain outstanding.

Media contact

Chin Wynn

(603) 7628 1170

chinwynn@ram.com.my