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RAM Ratings reaffirms AAA/Stable rating of Pengurusan Air SPV’s sukuk

IM Press Release
By IM Press Release
5 months ago
RAM Ratings reaffirms AAA/Stable rating of Pengurusan Air SPV’s sukuk


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  1. IM Press Release Service Published on :​ ​ Publications: ​ RAM Ratings reaffirms AAA/Stable rating of Pengurusan Air SPV’s sukuk 06 December 2018 RAM Ratings has reaffirmed the AAA/Stable rating of Pengurusan Air SPV Berhad’s (PASB or the Company) RM20 billion Islamic MTN Programme (2009/2039) (the Sukuk). PASB is the financing conduit of Pengurusan Aset Air Berhad (PAAB or the Group), the national water-asset company that has been tasked to facilitate the water restructuring exercise in Peninsular Malaysia and Labuan pursuant to the Water Services Industry Act 2006 (WSIA). The reaffirmation of the rating is based on RAM’s methodology for government-linked entities, PAAB is deemed dependent on the Government of Malaysia (GoM) as the Group relies on the substantial financial flexibility from the GoM. Under the transaction structure, the sukuk holders’ recourse to PAAB is recognised through an irrevocable and unconditional Purchase Undertaking Deed provided by the Group. As such, the rating of the Sukuk reflects PAAB’s credit risk; both PAAB and PASB are thus viewed in aggregate from a credit perspective. The explicit government support PAAB enjoys is underlined by the Group’s RM20 billion Government-Guaranteed IMTN Programme (2011/2041) (GG Programme), a five-year moratorium on novated federal government loans, and the GoM’s provision of soft loans and equity injections. Notably, the Ministry of Finance injected another RM70 million into PAAB in April 2018 (total equity injections to date: RM730 million). Given that some issues are beyond PAAB’s control, as underlined by the protracted delays in certain states, the Group faces immense challenges in the consolidation of water assets. To acquire state water assets and their related liabilities as part of the restructuring exercise, the Group has to assume loans extended to the respective states by the Federal Government, as well as issue new debts under the Sukuk and GG Programmes. The proceeds from these debt issues will be used to finance the capex for new water assets. As such, the Group shoulders a hefty debt burden, with a gearing ratio of 10.33 times at end-July 2018 along with RM20.73 billion of borrowings. We expect PAAB to continue gearing up in the future as it funds the water infrastructure of migrated states and takes over the water assets and liabilities from states that have yet to migrate to the new regime. Following the takeover of Syarikat Pengeluar Air Selangor Sdn Bhd by Pengurusan Air Selangor Sdn Bhd, Selangor is expected to become the next migrated state.
  2. IM Press Release Service Published on :​ ​ Publications: ​ Organisation Name: RAM Rating Services Berhad News Type: RATING ANNOUNCEMENT Source: Media Contact Padthma Subbiah (603) 7628 1162 Disclaimer: The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security's market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations. RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings' credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications. Similarly, the disclaimers above also apply to RAM Ratings' credit-related analysis and commentaries, where relevant.