MARC has affirmed its AAA_IS rating on Putrajaya Bina Sdn Bhd’s (PBSB) RM1.58 billion Islamic Medium-Term Notes (Sukuk Wakalah) Programme. The rating outlook is stable.

PBSB was established as a funding vehicle for its parent Putrajaya Holdings Sdn Bhd (PJH) (AAA/Stable) to undertake the development of nine blocks of government office buildings and one block of shared facilities in Parcel F, Precinct 1 in Putrajaya. The development is under a private finance initiative consisting of a concession agreement with the government, covering a three-and-a-half-year construction period, followed by a 25-year maintenance period during which the government will pay available charges (AC) and management charges (MC). The construction was completed five months ahead of schedule in April 2019 but the relevant government departments only moved in mid-November 2019 per the original planned commencement of the asset management phase. PBSB has received its first monthly AC and MC payments in December 2019 following the receipt of the Certificate of Acceptance from the government the month before.

The affirmed rating and outlook reflect the credit strength of the Malaysian government as the paymaster of AC and MC payments during the asset maintenance phase. The AC payments of RM215.6 million p.a. (paid on a monthly basis) is sufficient to meet PBSB’s financial obligations under the rated programme. The MC payments of up to RM69.2 million p.a. is subject to meeting specified key performance indicators (KPIs) for maintenance services. The services have been contracted to facilities management companies whose established track record in government office building maintenance mitigates the risk of not meeting the KPIs. The government buildings in Parcel F have a total gross built-up area of about 4.8 million sq ft and are tenanted by government departments and statutory bodies including Suruhanjaya Perkhidmatan Awam and Jabatan Audit Negara.

PBSB is required to maintain funds, equivalent to the finance service amount, one month ahead of its due date at all times. MARC’s sensitivity analysis on projected cash flows shows that PBSB’s finance service cover ratio (FSCR) will range between 1.19x (2020) and 4.77x (2030) throughout the asset management period (average: 2.29x). Dividend payments or repayment of shareholders’ advances are only allowed if the FSCR is above 1.50x after such distribution. MARC also considers concession termination risk due to the default by either PBSB or the government to be low.

Contacts:
Gan Peishi, +603-2717 2948/ peishi@marc.com.my; 
Raj Shankar, +603-2717 2956/ rajshankar@marc.com.my; 
Taufiq Kamal, +603-2717 2951/ taufiq@marc.com.my