RAM Ratings reaffirms AAA/stable/P1 ratings of Pengurusan Air SPV’s sukuk

Published on 18 November 2013

RAM Ratings has reaffirmed the AAA/stable/P1 ratings of Pengurusan Air SPV Berhad’s (PASB) RM20 billion Sukuk, comprising an Islamic MTN Programme (2009/2039) and an Islamic CP Programme (2009/2016).

The ratings reflect the strategic importance of Pengurusan Aset Air Berhad’s (PAAB) role under the Water Services Industry Act 2006, to restructure the water-services industry by consolidating the ownership and funding responsibility of water assets in Peninsular Malaysia and the Federal Territory of Labuan. PAAB is wholly owned by the Government of Malaysia (GoM). Given its unique function, we are of the view that PAAB is an entity that is ultimately backed by the GoM as it continuously relies on external funding for capex and is not expected to be commercially driven. As such, PAAB is considered a dependent entity under our Government Linked-Entities framework; hence, the credit risk of PAAB mirrors that of the GoM. The GoM’s support is underlined by its guarantee on PASB’s additional RM20 billion IMTN Programme, soft loans allocated under the 10th Malaysia Plan, and a 5-year moratorium on all Novated Federal Government loans.

PASB is a special-purpose vehicle set up as a 100%-owned subsidiary of PAAB, to finance the latter’s acquisition of water assets and accompanying liabilities in Peninsular Malaysia and Labuan, as well as the subsequent development of water infrastructure in the states involved. Under the transaction structure, the Sukuk holders’ recourse to PAAB is recognised via an irrevocable and unconditional Purchase Undertaking Deed. As such, the ratings of the Sukuk reflect PAAB’s credit risk; we thus view both PAAB and PASB in aggregate from a credit perspective.

Media contact

Chin Wynn

(603) 7628 1170

chinwynn@ram.com.my