RAM Ratings has reaffirmed the AAA/Stable rating of CJ Capital Sdn Bhd's RM114 million Sukuk Murabahah (2010/2020) (the Sukuk). The Company, wholly owned by Cahaya Jauhar Sdn Bhd (CJSB), had been set up as a funding conduit to raise the Sukuk.
The rating reflects the strength and legality of the key governing documents. Under the Deed of Annuity, the Johor State Government (the State) is irrevocably and unconditionally obligated to pay annuities to CJSB for a period of 10 years. The annuities are payable regardless of the termination or cancellation of agreements relating to the Kota Iskandar project in Nusajaya, Johor (the Project), or any variation, delay or cessation of other phases of the Project. The rating is also supported by the predictability of CJ Capital's cashflow, as well as the tight structural features and restrictive covenants of the financing facilities.
To date, annuity payments from the State have been received as scheduled, and are expected to remain so for the rest of the Sukuk's tenure. These are paid directly into the Annuity Account, which is solely managed by the Trustee. Under the Deed of Hibah, CJSB had given and assigned the Deed of Annuity to CJ Capital, thus effectively protecting the Sukuk holders in the event CJSB faces liquidation or insolvency. In addition, covenants restrict CJ Capital from paying any dividend or embarking on any other activity until the Sukuk has been fully repaid.
Meanwhile, CJ Capital faces a low level of counterparty risk as the transaction is backed by contractual payments from a strong counterparty, i.e. the State. In addition, Johor is viewed to be of economic importance to Malaysia and enjoys a sound relationship with the Federal Government.
CJSB is a 60:40 joint venture between UEM Land Berhad and the State via State Secretary Johore (Incorporation). CJSB has been awarded the contract for the development and maintenance of the Project. Kota Iskandar is the State's new administrative centre in Nusajaya which houses the State and Federal Government offices.
Media contact
Kathleen Por
(603) 7628 1015
kathleen@ram.com.my
© Press Release 2015
