Friday, January 21, 2011

RAM Ratings maintains BBB3 ratings of water players, but on Rating Watch, negative

KUALA LUMPUR: RAM Rating Services Bhd has maintained the BBB3 ratings of the respective debt issues of Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (SPLASH), Destinasi Teguh Sdn Bhd and Sungai Harmoni Sdn Bhd.

"However, the ratings remain on Rating Watch with a negative outlook, pending the resolution of the Selangor water industry's restructuring exercise," it said on Friday, Jan 21.

RAM Ratings said the BBB3 rating of SPLASH's BaIDS was based on the expected support from the Federal Government, the Selangor State Government and/or its shareholders to help allay SPLASH's liquidity crunch.

The ratings agency said SPLASH had on Wednesday, Jan 19, failed to meet the minimum balance for its finance service reserve account (FSRA), as required by the BaIDS's financing documents, on account of insufficient cash.

"To demonstrate their support, all of SPLASH's shareholders have provided a written undertaking to fund any shortfall on the RM226 million of profit and principal payments due under the BaIDS on July 19, 2011," it said.

It said via an extraordinary resolution, the bondholders waived the FSRA requirement for Jan 19.

RAM Ratings said it believed the federal and state governments remained committed to resolving the restructuring exercise given the strategic importance of the water sector.

As for Destinasi Teguh and Sungai Harmoni, it said the ratings of the respective proposed bonds and redeemable loan stocks (RLS) were underpinned by the credit profile of their main counterparty, SPLASH (via a 30-year operations and maintenance agreement with Sungai Harmoni).

"Given the transaction structure, the credit profile of SPLASH is directly linked to the ability of Destinasi Teguh and Sungai Harmoni to service their debts. On this score, we understand that the Securities Commission has extended the approval period for the proposed bonds and RLS until May 25, 2011," it said.

Company Principal activities Issue SPLASH Operator of Phases 1 and 3 of the Sungai Selangor water-treatment plants. Syarikat Bekalan Air Selangor Sdn Bhd is the sole off-taker for its treated water. RM1,407 million Al-Bai Bithaman Ajil Debt Securities Issuance Facility (BaIDS) (2000/2016) Destinasi Teguh

Funding conduit and unit of Taliworks Corporation Berhad. Destinasi Teguh relies on interest and dividend payments from Sungai Harmoni to pay its dues. Proposed RM395 million Secured Bonds Sungai Harmoni

Operations and maintenance service provider for SPLASH, and a 100%-owned subsidiary of Taliworks. Proposed RM90 million Redeemable Loan Stocks

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