Thursday, August 4, 2011

RAM Ratings reaffirms AAA rating of CJ Capital's Sukuk Murabahah

KUALA LUMPUR: RAM Ratings has reaffirmed the AAA rating of CJ Capital Sdn Bhd's (CJ Capital) RM114 million Sukuk Murabahah with a stable outlook.

CJ Capital was set up as a funding vehicle to raise the Sukuk, and is wholly owned by Cahaya Jauhar Sdn Bhd (CJSB).

Ina statement Thursday, Aug 4, RAM Ratings said CJSB is a 60:40 joint venture between UEM Land Berhad and the Johor State Government (Johor State) via State Secretary Johor (Incorporation) (JSSI).

CJSB had been set up to undertake the turnkey design-and-build contract for the development of Kota Iskandar in Nusajaya, Johor (Kota Iskandar or the Project).

In return for the completion of Phase 1 and additional works ' pertaining to furnishings, landscaping and security, CJSB is entitled to receive annuity payments of RM15 million per annum for 10 years from JSSI (the Annuity).

RAM Ratings said the AAA rating reflected the stream of annuity payments payable by a strong counterparty, i.e. the Johor State (via JSSI).

It said the continuance of JSSI's obligations was ensured, premised on the strength and enforceability of key governing documents (principally the Deed of Annuity and Deeds of Hibah).

This is further supported by the structural features of the transaction, which minimise potential cashflow leakage to safeguard CJ Capital's debt-servicing ability, it said.

To-date, all annuity payments received from JSSI have been prompt, said the rating agency.

'That said, we recognise that timeliness of payment can be delayed by administrative procedures. In assessing this transaction, RAM Ratings has taken into consideration the time buffer, i.e. the period between the date that JSSI is expected to make the annuity payments (i.e. every 28 February from 2011 until 2019) and the dates that the profit and principal payments on the Sukuk Murabahah fall due, i.e. 15 January and 15 July every year, effective 2011 until its maturity on 15 July 2020.

'Essentially, we view that the time buffer between the receipt of the annuity and the subsequent payments of principal and profit as adequate,' it said.

On this note, CJ Capital has met the scheduled principal and profit payments amounting to RM9.26 million on 15 July 2011, said RAM Ratings.


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