MARC AFFIRMS AAA RATING ON SPECIAL PORT VEHICLE BERHAD’S RM1,310 MILLION ASSET-BACKED BOND FACILITY; OUTLOOK REMAINS NEGATIVE

Jul 26, 2013 -

MARC has affirmed the AAA rating on Special Port Vehicle Berhad’s (SPVB) RM1,310.0 million nominal amount asset-backed serial bonds facility with a negative outlook. The rating action affects the outstanding bonds of RM740.0 million following the redemption of the RM100.0 million Series 6 in July 2012. The assets backing the transaction comprise the deferred payments from Port Klang Authority (PKA) amounting to RM1,699.6 million at transaction close based on the sale and purchase agreement (SPA) of a 999.5-acre parcel of leasehold land on Pulau Indah.

Upon the full repayment of debt issued by Free Zone Capital Berhad, Valid Ventures Bhd and Transshipment Megahub Sdn Bhd, SPVB’s bond remains the only outstanding debt issuance of special purpose entities (SPE) established by Kuala Dimensi Sdn Bhd (KDSB) to finance the Port Klang Free Zone (PKFZ) project. The affirmed rating is premised on the satisfactory repayment track record of PKA in relation to its deferred payment obligations to SPVB for the land acquisition. Subsequent to the receipt of the seventh repayment from PKA amounting to RM170.0 million in end-June 2013, cash balances in SPVB’s designated accounts of RM203.1 million are sufficient to meet the upcoming bond redemption of RM130.0 million on July 30, 2013 as well as the next two semi-annual coupon payments. 

The negative outlook continue to reflect the vulnerability to the government’s willingness to provide continued support for the outstanding debt arising from the ongoing legal suits associated with the development of the PKFZ and negative public sentiment surrounding the perceived bail-out of the project. The disputes have ultimately raised issues over the validity and enforceability of the letters of support issued by the Ministry of Transport (MOT) for the deferred payment receivables from PKA. MARC views the continued repayment as evidence of the government’s commitment to abide by the letters of support in respect of the rated debt. Any sign of weakening support may have an adverse impact on the rating.  

Contacts:

Tan Eng Keat, +603-2082 2265/ engkeat@marc.com.my;

David Lee, +603-2082 2255/ david@marc.com.my.