[RAM] RAM Ratings assigns preliminary AA2 rating to Ideal Water Resources's proposed RM255 mil Tranche 2 Sukuk

RAM Ratings has assigned a preliminary AA₂/Stable rating to Ideal Water Resources Sdn Bhd’s (IWR, the Issuer) proposed RM255 mil Tranche 2 Sukuk (2025/2034) (Tranche 2 Sukuk) under its existing Sukuk Murabahah Programme of up to RM1 bil (2023/-). The rating reflects IWR’s strong debt coverage, underpinned by the predictable and stable, concession-backed cashflows from TRIplc Ventures Sdn Bhd (TVSB), and its second ranking security position relative to TVSB’s other obligations. 

TVSB is the concessionaire for the development and maintenance of Zone 1 Phase 2 of the Universiti Teknologi Mara (UiTM) campus in Puncak Alam under a 23-year concession agreement, for which it receives monthly concession payments in the form of Availability Charges (ACs) and Maintenance Charges (MCs).

IWR, a funding vehicle of Puncak Niaga Holdings Berhad (Puncak Niaga or Group), will use the bulk of the proceeds from its RM255 mil proposed Sukuk to advance to the Group and its related company Pujian Bayu Sdn Bhd (Pujian Bayu). The remaining proceeds will be used to partially redeem IWR’s existing Tranche 1 Sukuk, pre-fund designated accounts and defray issuance expenses. Pujian Bayu’s MTN (rated AA₃/stable by RAM) will be fully redeemed upon the receipt of advances from IWR.

The proposed Sukuk is structured to monetise the remaining concession cashflows from TVSB, which will be distributed directly to IWR through several assignments of rights to cashflows and security (Figure 1). To facilitate this, the transaction involves reorganising various intercompany dues. The transaction also assumes that Pujian Baru will purchase all outstanding Senior MTNs from the secondary market, making it the sole bondholder. TVSB’s Junior Notes are solely held by Pujian Baru (funded by Pujian Baru’s RM200 mil MTN) and supported by TVSB’s residual cash flows after meeting its senior MTN obligations. 

The financing transaction is complex, involving several related parties to be governed by various intercompany agreements, both existing and new, across the Group that involve the assignment of rights to TVSB’s cash flow and securities directly to IWR. These agreements set out to align the interests of the stakeholders, provide governance for better financial management and protection for IWR’s lenders. Specific covenants imposed on IWR, TRIplc Berhad (TRIplc), TVSB and/or Pujian Bayu  include prohibition from engaging in unrelated business, restrictions on additional borrowings and distributions/advances to shareholders, as well as spending limits on expenses.

Figure 1: Schematics of the proposed Tranche 2 Sukuk financing structure


All considered, RAM’s credit assessment of IWR’s proposed Tranche 2 Sukuk hinges on TVSB’s  performance and concession cashflows, with IWR’s cash flows deriving from the coupon and principal repayments on TVSB’s Senior Bonds and Junior Notes as well as dividend streams from TVSB. TVSB has demonstrated commendable operational track record, underlined by its ability to maintain its KPI well above the concession requirement of 93% along with minimal Maintenance Charges deductions in recent years. In 2024, payments from UiTM continue to be timely with ACs and MCs received within an average of 64 days and 20 days, respectively. 

Our sensitised analysis projects TVSB to generate an average of RM30.7 mil in pre-financing cashflow between 2025 and 2034. This, along with accumulated cash, will allow TVSB to channel an average of RM31.9 mil annually to IWR in meeting Tranche 2 Sukuk obligations. Consequently, we expect IWR’s debt protection metrics to remain strong, with projected minimum and average Debt Service Coverage Ratios (DSCR) of 1.51 times and 2.32 times, respectively. As principal repayment escalates in later periods of the proposed Sukuk tenure, there may be some instances where IWR may be unable to meet its Debt Service Reserve account requirements although this is not a covenant breach. 

RAM’s assessment indicates that cashflows from TVSB will sufficiently fund IWR’s Sukuk repayments and we have not given any consideration to the corporate guarantee from Puncak Niaga or TRIplc’s obligation to bridge any shortfall in dividend distributions or payments by TVSB. While we acknowledge Puncak Niaga’s willingness to support the transaction, its capacity may be limited by its weak and still volatile financial profile.   

The rating assigned is preliminary, based on information, representations and certain assumptions provided up to 11 June 2025. We have also adopted the tax estimates provided and considered views of the transaction legal advisor. A final rating will only be assigned upon our satisfactory review of the transaction documents and an assessment of the legal and tax opinion of the structure.


Analytical contacts
Chew Chiang Lim
(603) 2708 8297
chianglim@ram.com.my

Davinder Kaur Gill
(603) 2708 8220
davinder@ram.com.my

Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my