Encorp unit to issue RM1.58 bn Islamic bonds

KUALA LUMPUR (March 8) : Builder ENCORP BHD [] plans to issue up to RM1.58 billion worth of Islamic bonds to refinance the builder and property developer’s existing debt obligations.

In a statement to Bursa Malaysia on Thursday, Encorp said the exercise will be undertaken via indirect unit Encorp Systembilt Sdn Bhd (ESSB)

“The proposed ESSB Sukuk Murabahah issue will be issued in one lump sum and in tranches with tenures of up to 16 years from the issuance date. The profit rates for each tranche of the proposed ESSB sukuk Murabahah issue shall be determined prior to the issuance,” Encorp said.

Encorp said the Syariah-compliant instrument will not be listed on any stock exchange.

ESSB had in 2000, 2002 and 2004 issued a collective RM2.75 billion worth of Islamic bonds to part finance the development of 10,000 units of teachers’ quarters in the Malaysia. This follows a privatisation agreement between ESSB and the government in February 1998.



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Encorp unit Encorp Systembilt proposes up to RM1.57 bn debt notes

KUALA LUMPUR (Feb 3): ENCORP BHD []’s unit Encorp Systembilt Sdn Bhd has proposed to issue up to RM1.575 billion (2012/2028) in Islamic debt notes, bulk of which would be used to refinance the outstanding amount on its debt notes.

RAM Rating Services Bhd said on Friday it had assigned preliminary AA2 rating to Encorp Systembilt’s proposed Sukuk Murabahah of up to RM1.575 billion. The long-term rating carries a stable outlook.

To recap, Encorp Systembilt is the concessionaire for the building of 10,000 units of teachers’ quarters throughout Malaysia, based on the “build, transfer and finance” concept.

It issued Al-Bai’ Bithaman Ajil notes issuance facility (ABBA notes), raising proceeds of about RM1 billion to fund the CONSTRUCTION [].

All 10,000 units were eventually completed and handed over to the government in early 2004, under the privatisation agreement. In return, the government would make monthly concession payments to Encorp Systembilt, with effect from the month following the issuance of the certificate of practical completion for each cluster of units, until the expiry of the 30-year concession in February 2028.

“Proceeds from the proposed Sukuk Murabahah will be used to refinance the outstanding amount on Encorp Systembilt’s existing ABBA Notes (up to RM1.5 billion), to fund the trustees’ reimbursement account and the balance shall be utilised for the company’s general corporate purposes,” it said.

RAM Ratings said the rating of the proposed Sukuk Murabahah reflected the stream of highly predictable and contractually-backed concession payments from a strong counterparty, that is the government through the Ministry of Education.

The rating agency noted the government demonstrated a track record of regular payments to the company since November 2006, with monthly instalments received within one to two months from the invoice dates.

“Backed by this stream of monthly payments, we expect Encorp Systembilt to register a stressed minimum finance service cover ratio (FSCR) of 1.20 times. In addition, the company does not face any performance or operating risks as its obligations under the privatisation agreement have already been fulfilled and it is not required to operate the quarters,” it said.

RAM Ratings pointed out Encorp Systembilt’s debt-servicing ability was also safeguarded by the transaction’s tight structure and covenants, which minimise cashflow leakage.

These include limits on the company’s activities and the incurrence of additional debt. The company is also not permitted to declare or pay any dividends during the tenure of the proposed Sukuk Murabahah, except for a one-time inter-company loan and/or dividend payment to its holding company and/or ultimate holding company from the proceeds of the proposed Sukuk Murabahah.

The Escrow Account – one of the designated accounts to be opened by Encorp Systembilt – will capture, amongst others, the monthly concession payments from the Government; this account will be operated solely by the security trustee and pledged to Sukuk holders as security.

“However, Encorp Systembilt’s debt-servicing ability is vulnerable to any material delay in disbursement of concession payments as it relies solely on the monthly instalments to service its proposed Sukuk Murabahah. As such, the possibility of future delays cannot be entirely discounted,” said RAM Ratings.

The last tranche of the proposed Sukuk Murabahah is expected to mature after the end of the concession period.

RAM Ratings said assuming that the proposed Sukuk Murabahah is issued on April 1, 2012, the last tranche of the proposed Sukuk Murabahah is expected to mature on April 1, 2028, that is after the concession expires on Feb 9, 2028.

It noted that the repayment of the proposed Sukuk Murabahah was, however, well supported by the accumulated funds in the escrow Account.

“Under our stressed scenario, the Company’s cash reserves after the redemption of the proposed Sukuk Murabahah are estimated to come up to RM24.84 million (as at April 2028),” it said.



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Banks, blue chips lift KLCI firmly higher

KUALA LUMPUR (Jan 26): The FBM KLCI closed firmly higher on Thursday as banking and blue chip counters rallied, while investors also nibbled on lower liner stocks.

The 30-stock index closed 4.10 points higher at 1,523.86.

At the regional markets, Hong Kong’s Hang Seng Index jumped 1.63% to 20,439.14, South Korea’s Kospi edged up 0.25% to 1,957.18 and Singapore’s Straits Times Index edged up 0.10% to 2,894.43, while Japan’s Nikkei 225 fell 0.39% to 8,849.47.

Financial markets in mainland China and Taiwan are shut for the Lunar New Year holiday this week and will resume trading on Monday.

Meanwhile, European shares rose on Thursday, halting two-days of losses, after the U.S. Federal Reserve said interest rates would remain low for a considerably longer period than expected and it was ready to offer additional stimulus to boost economic growth, according to Reuters.

On Bursa Malaysia, Genting PLANTATION []s added 37 sen to RM9.65, Tahps 32 sen to RM4.50, TDM and AutoV 21 sen each to RM4.42 and RM1.86, Batu Kawan, DRB-Hicom and AIC 20 sen each to RM19, RM2.50 and RM1.49, while Boxpak added 19 sen to RM2.36.

Among banking stocks, HLFG added 36 sen to RM12.26, Hong Leong Bank up 30 sen to RM11.60, Public Bank eight sen to RM13.40, AMMB three sen to RM5.82 and Maybank two sen to RM8.22.

DBE Gurney was the most actively traded counter with 130.3 million shares done. The stock added 1.5 sen to 14 sen.

Other actives included Karyon, Hibiscus, JCY, DRB-Hicom and Jotech.

Among the decliners, Dutch Lady fell 20 sen to RM25.58, Malayan Flour Mills 16 sen to RM3.87, Encorp and Nestle 10 sen each to 58 sen and RM56, APM Automotive and Can-One down eight sen each to RM4.60 and RM2.09, Top Glove seven sen to RM5.06, while Inno, Sungei Bagan and KLCCP lost six sen each to RM1.44, RM2.90 and RM3.30 respectively.



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