“The Government is hoping to settle all issues that are not just related to the water industry but also bondholders,'' Energy, Green Technology and Water Minister Datuk Seri Peter Chin told StarBiz.
According to Chin, the Cabinet is studying a proposal for this overall solution which involves restructuring talks with the Selangor government. Details would be revealed later.
“The Prime Minister, who is also the Finance Minister, is looking at it closely,'' Chin added.
The Finance Ministry in consultation with the Prime Minister's Department and related agencies is looking at various structures that may be drawn up to assist the financial markets and bondholders, many of which are financial institutions such as the Employees Provident Fund, which have invested heavily in these bonds.
The situation worsened yesterday with downgrades on seven of these bonds by Malaysian Rating Corp (MARC) while RAM Ratings had, two weeks ago, maintained negative watch over three issues of about RM2bil from Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash), Destinasi Teguh and Sungai Harmoni.
In its downgrades of the seven bonds with the exception of Viable Chips (M) Sdn Bhd's bank-guaranteed (BG) BaIDS, MARC referred to their “increasingly challenged liquidity positions'' arising from the unresolved deadlock in talks between the Selangor and Federal governments as well as water concessionaires on the restructuring of water assets in the state.
Amid concerns of an increased likelihood of missed payments as the maturities approached and weakened credit profiles, MARC believed that Puncak Niaga (M) Sdn Bhd (PNSB) and Puncak Niaga Holdings Bhd (PNHB) might “become more vulnerable to a possible declaration of an event-of-default due to minimum rating requirements imposed on the rated debt.''
This possible demand for repayment by bondholders will, in turn, increase the likelihood of cross-default and cross-acceleration, MARC said in a statement yesterday.
The Government might arrange a bond buyback to protect the bondholders from potential credit-related losses; however this would not increase the probability of timely payment by the rated issuers, MARC added.
Syarikat Bekalan Air Selangor Sdn Bhd's (Syabas) long and short term ratings were downgraded on concerns over its rising trade payables and continuing cashflow mismatch between costs and revenues.
MARC noted that Syabas recently reduced its monthly payment to water treatment operators to 42% of invoiced amounts from 45%.
The deteriorating credit profile of Syabas, as the offtaker, is likely to affect that of PNSB, whose accounts receivables' levels are becoming unmanageable.
“MARC takes some comfort that PNSB's debt service reserve account is fully funded to meet the BaIDS principal repayment of RM180mil maturing in October 2011.
“However, the rating agency is concerned that PNSB may not have sufficient liquidity to fund its debt obligations on the A notes, should the put option be exercised on Nov 18, 2011, with RM328.13mil still outstanding,'' MARC said.
The downgrade of Splash's long and short term ratings reflects MARC's concerns over Splash's inability to upstream dividends from subsidiary to parent company.
However, there is some some liquidity support from parent Kumpulan Perangsang Selangor Bhd, to provide liquidity support for the BaIDS issued by Viable Chips, a special purpose funding vehicle wholly-owned by Kumpulan Perangsang.
The agency believes that Kumpulan Perangsang's own credit profile has been substantially affected by the diminished dividend paying capacity of the water treatment operators.
Meanwhile, MARC expected Titisan Modal's financial risk profile to remain constrained due to ongoing liquidity and cash problems at its principal operating subsidiary and water treatment operator, Konsortium Abass Sdn Bhd. - TheStar
No comments:
Post a Comment