RAM Ratings reaffirms AA2 rating of Tenaga Rapi’s debt issue

Published on 19 June 2013

RAM Ratings has reaffirmed the long-term rating of Tenaga Rapi Sdn Bhd’s (“Tenaga Rapi” or “the Company”) RM60 million Nominal Value Secured Bonds (“Subordinated Debt”) at AA2 with a stable outlook.

Tenaga Rapi is a trust-owned, special-purpose company, functioning as a funding vehicle to acquire Pustaka Panglima (Malaysia) Sdn Bhd (“Pustaka Panglima”) from Panglima Capital (M) Sdn Bhd. Pustaka Panglima owns 100% of Anjung Bahasa Sdn Bhd (“Anjung”) – the concessionaire for the design, construction and operation of an office complex for Dewan Bahasa dan Pustaka (“DBP”). In return, Anjung is entitled to monthly concession payments as well as maintenance and management (“M&M”) fees from the Government of Malaysia (“GoM”) (via DBP) over a 17-year period, as stipulated in the Privatisation Agreement (“PA”) between Anjung and the GoM. Anjung’s outstanding RM110 million Junior Notes (or “Senior Debt”) (rated AA1/Stable by RAM) matures on 18 June 2015. Its residual cash after servicing the Senior Debt is the sole source of repayment of the Subordinated Debt. 

The 1-notch rating differential between the Subordinated Debt and Anjung’s Senior Debt reflects the former’s structural subordination. The rating of the Subordinated Debt is supported by Tenaga Rapi’s projected minimum subordinated debt service coverage ratio (“Sub-DSCR”) (with cash balances, measured over a 12-month period on semi-annual principal repayment months) of 1.72 times.

The Company’s debt-servicing ability is safeguarded by the tight structure and strict covenants of this transaction, which minimise cashflow leakage. The covenants include a cap on Pustaka Panglima’s yearly operating expenses, the requirement that the trustee of Tenaga Rapi (“Trustee”) be the sole signatory for any cash outflow from Pustaka Panglima, and the securing of the Trustee’s approval of the annual M&M budget for the DBP office complex and any cash outflow (post-repayment of Senior Debt). The structure and covenants under the Senior Debt facility further minimise cashflow leakage.

The rating also reflects Anjung’s stable and robust residual cashflow. Counterparty risk faced by Anjung is low, given that the GoM is the ultimate paymaster of monthly concession payments under the PA and that it has established a prompt track record of payments. We do not discount the possibility of early termination of the PA due to default on the part of Anjung. However, operational risk is deemed minimal in view of the straightforward nature of its M&M works.

Media contact

Umar Marzuki

(603) 7628 1055

umar@ram.com.my