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

Published on 06 January 2015

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 pursuant to 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. Accordingly, PAAB is considered a dependent entity under RAM’s rating methodology for government-linked entities. Given its unique function, we are of the view that PAAB is an entity that is ultimately backed by the Government of Malaysia (GoM) as it continuously relies on external funding for capex and is tasked with social responsibilities without a profit-maximising objective.

The GoM’s support is further 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. Notably, PAAB has been covenanted as a directly or indirectly 100%-owned subsidiary of the Government at all times.

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
Chinthamani Thanneermalai
(603) 7628 1013
chinthamani@ram.com.my