RAM Ratings reaffirms AAA rating of CJ Capital’s sukuk programme

Published on 30 July 2013

RAM Ratings has reaffirmed the AAA rating of CJ Capital Sdn Bhd’s (“CJ Capital” or “the Company”) RM114 million Sukuk Murabahah (2010/2020); the long-term rating has a stable outlook. CJ Capital had been set up as a funding vehicle to raise the Sukuk Murabahah; it is wholly owned by Cahaya Jauhar Sdn Bhd (“Cahaya Jauhar” or “the Company”).

Cahaya Jauhar is a 60:40 joint venture between UEM Land Berhad and the Johor State Government (“State Government”) via State Secretary Johore (Incorporation) (“JSSI”). The Company had been incorporated to undertake the turnkey design-and-build contract for the development of Kota Iskandar in Nusajaya, Johor (“the Project”). Phase 1 and additional works pertaining to furnishings, landscaping and security have already been completed, in return for which Cahaya Jauhar is entitled to receive irrevocable and unconditional annuity payments of RM15 million per annum from JSSI for 10 years (“the Annuity”). The Annuity has been given to CJ Capital via the Deed of Hibah.

The AAA rating is supported by the highly predictable annuity payments from a strong counterparty, i.e. the State Government. The fulfilment of JSSI’s obligations is ensured, based on the strength and enforceability of the key governing documents (principally, the Deed of Annuity and the Deed of Hibah). Notably, the annuity payments are payable regardless of the termination or cancellation of agreements relating to the Project, or the variation, delay or cessation of the Project’s other phases. To date, all annuity payments from JSSI have been prompt.

The structural features of the transaction minimise potential cashflow leakage. The funds are to be paid directly into the Annuity Account – a designated account solely managed by the Trustee. The assignment of the Annuity and the charge over the designated accounts, including the Annuity Account, ensure that the Sukuk holders’ legal rights over the funds in these accounts are protected. In addition, covenants restrict CJ Capital from paying any dividend or embarking on any other activity (apart from exercising its rights or performing its obligations under the transaction agreements) until the Sukuk Murabahah has been fully repaid.

Media contact

Jason Tan

(603) 7628 1030

jasontan@ram.com.my