MARC has affirmed its AA-IS rating with a stable outlook on AZRB Capital Sdn Bhd’s (ACSB) outstanding RM535.0 million Islamic Medium-Term Notes (Sukuk Murabahah).
ACSB is a special-purpose vehicle of Ahmad Zaki Resources Berhad (AZRB) and was set up to subscribe to Redeemable Convertible Preference Shares (RCPS-i) issued by sister company Peninsular Medical Sdn Bhd (PMSB). Availability payments (AP) and maintenance charges (MC) received by PMSB are routed to ACSB’s designated accounts to meet the sukuk obligations.
The rating is premised on the quantum of the AP and MC payments which are deemed sufficient to meet the financial obligations under the sukuk. A moderating factor is the potential for unbudgeted increases in maintenance costs that could reduce cash flow buffer. We note that ACSB’s financial obligations under the rated Sukuk Murabahah are insulated from risks associated with project sponsor cum parent AZRB, given ACSB’s bankruptcy remote status and by the assignation of AZRB’s shares in PMSB to sukukholders.
PMSB receives monthly AP and MC of about RM5.8 million and RM2.5 million under a concession agreement with the government to develop and maintain the 300-bed teaching hospital for the International Islamic University of Malaysia (IIUM) in Kuantan. We note that the monthly transfer of funds to meet the operating requirement of the hospital has been in line with the asset maintenance forecast. We understand that there have been no issues with the maintenance services at the hospital, undertaken by Advance Pact Sdn Bhd which provides similar services for several other government hospitals. The first principal repayment of the sukuk amounting to RM100.0 million is due in December 2022. As at end-June 2021, balance in ACSB’s Finance Service Reserve Account stood at RM95.6 million.
Contacts:
Farhan Darham, +603-2717 2945/ farhan@marc.com.my;
Umar Abdul Aziz, +603-2717 2962/ umar@marc.com.my;
Taufiq Kamal, +603-2717 2951/ taufiq@marc.com.my.
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