MARC affirms AAA rating on SPVB's RM1.3b bond

PETALING JAYA: The Malaysian Rating Corp Bhd (MARC) has affirmed its AAA rating on Special Port Vehicle Bhd's (SPVB) RM1.31 billion nominal amount asset-backed serial bonds facility with a negative outlook.
The rating action affects the outstanding bonds of RM480 million.
"The affirmed rating is premised on the satisfactory and timely repayment track record of Port Klang Authority (PKA) in relation to its deferred repayment obligations to SPVB for the purchase of 999.5 acres of leasehold land on Pulau Indah for the Port Klang Free Zone (PKFZ) project," MARC said in a statement yesterday.
The rating also takes into account the tangible financial support provided to PKA via soft loans by the federal government to meet the deferred repayment obligations, it said.
On June 30, 2015, PKA made its ninth deferred repayment amounting to RM170 million, boosting the cash balances in SPVB's designated accounts to RM216.2 million. This amount is sufficient to cover SPVB's debt obligations over the next 12 months, including the upcoming redemption of the RM150 million Series 9 on July 30, 2015.
"The negative outlook continues to reflect the vulnerability of the future deferred payments, which are subject to the government's willingness to provide continued support to meet outstanding debt obligations on the PKFZ (Port Klang Free Zone) project. Any sign of weakening support may have an adverse impact on the affirmed rating," MARC said.
PKFZ was initially mooted in 1997 and was supposed to have cost RM2.1 billion, but this grew to RM4.6 billion in 2007, before an audit by PricewaterhouseCoopers commissioned by then Transport Minister Datuk Ong Tee Keat in 2008 showed that the total cost including interest payments was projected to hit RM12.5 billion.
The PKFZ scandal eventually lead to criminal charges being filed against then transport minister Tun Dr Ling Liong Sik. He was eventually acquitted of the charges in October 2013.