[RAM] RAM Ratings affirms rating of Starbright Capital's water receivables-backed notes

RAM Ratings has affirmed the AAA/Stable rating of the RM665 mil Medium-Term Notes (the Notes) under Starbright Capital Berhad’s (the Issuer) RM700 mil Asset-Backed Medium-Term Notes Facility. 

The transaction monetises the balance of receivables due under the Termination and Settlement Agreement (TSA) between Pengurusan Air Selangor Sdn Bhd (Air Selangor or the Guarantor), Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (SPLASH or the Obligor) and Sungai Harmoni Sdn Bhd (the Originator). 

Established as a sole-purpose funding vehicle, Starbright’s cashflow receipts stem solely from scheduled and fixed annual instalments payable by SPLASH under the TSA (Annual Instalments). The Issuer has ultimate recourse to Air Selangor – SPLASH’s parent company – that undertakes to pay any missed Annual Instalments, including default interest, upon written demand.

The rating affirmation reflects the credit profile of Air Selangor (click here for more information) in its role as the Guarantor for the Annual Instalments. The largest water operator in Malaysia, Air Selangor is the sole licence holder for water treatment and distribution services in Selangor and the Federal Territories of Kuala Lumpur and Putrajaya. It plays a critical public policy role for the Selangor state government. The highly anticipated support from the state government in times of financial distress underpins our view that the Guarantor’s credit strength mirrors that of the state. Selangor’s State Implicit Strength (SIS) is assessed to be robust, the highest ranking in RAM’s SIS Framework.

Starbright’s receipt of Annual Instalments has been timely to date. As at end-June 2023, RM100.38 mil of cash in the transaction’s Settlement Account and the remaining RM511.71 mil of outstanding Annual Instalments to be received are more than sufficient to cover coupon and principal obligations under the outstanding Notes. Based on the designated accounts report as at the same date, actual transaction expenses incurred were largely in line with the levels estimated. 

The transaction allows the Issuer to use the residual balance in the Settlement Account, after meeting transaction obligations, to satisfy the deferred purchase price of the receivables on each anniversary of the issue date. To address cashflow deficit risk in the unlikely event of a delay in Annual Instalments, RM1.0 mil has been set aside as a contingent buffer to meet principal due on the Notes. 


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Liew Kar Ling
(603) 3385 2586
karling@ram.com.my

Tan Han Nee
(603) 3385 2529
hannee@ram.com.my

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Sakinah Arifin
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