RAM Ratings reaffirms AAA/Stable rating of Pengurusan Air SPV's Sukuk
RAM Ratings has reaffirmed the AAA/Stable rating of Pengurusan Air SPV Berhad’s (PASB) MYR 20 billion Islamic MTN Programme (2009/2039) (the Sukuk). Meanwhile, following the expiry of PASB’s Islamic CP Programme (2009/2016) on 1 December 2016, RAM Ratings no longer has any rating obligation in respect of the programme, previously rated P1/Stable. PASB is a special-purpose vehicle set up as a wholly owned subsidiary of Pengurusan Aset Air Berhad (PAAB).
The rating reflects PAAB’s strategic role pursuant to the Water Services Industry Act 2006 (WSIA), which is aimed at restructuring the water-services industry by consolidating the ownership of and responsibility for water assets in Peninsular Malaysia and the Federal Territory of Labuan. According to RAM's government-linked entity rating methodology, PAAB is deemed dependent on the government as it continues to rely on external funding for capex as well as other forms of support. This is underlined by the group’s additional MYR 20 billion Government-Guaranteed IMTN Programme (2011/2041), a five-year moratorium on novated federal government loans and the provision of current and prospective soft loans and equity injections. Under the transaction structure, the Sukuk holders’ recourse to PAAB is recognised via an irrevocable and unconditional Purchase Undertaking Deed provided by the Group. As such, the rating of the Sukuk reflects PAAB’s credit risk, and both PAAB and PASB are thus viewed in aggregate from a credit perspective.
Given the capital-intensive nature of its business, the group’s debt load is inherently hefty, standing at MYR 19.1 billion as at end-June 2016. As PAAB progressively acquires water assets and related liabilities from state water operators, assumes the respective states’ novated federal government loans, and funds the water infrastructure of migrated states, we expect the Group to continue to gear up in the coming years.