The transaction is brought to the market by UBS Limited and Noriba Bank BSC. The rating addresses (a) the timely payment of the distribution amount by the end of the grace period for each distribution date, and the ultimate repayment of principal by the scheduled distribution date in 2009. The complete rating action is as follows:
Issuer: Sarawak Corporate Sukuk Inc.
US$350,000,000 Trust Certificates due 2009, rated Baa3
The Baa3 rating assigned highly correlates to the foreign currency senior unsecured debt rating of the Sarawak Economic Development Corporation (SEDC) and is based on the following factors:
1. the payment obligations of SEDC under the transaction documents, which will rank pari passu with its foreign currency senior unsecured debt obligations;
2. the letter of support provided by the State Government of Sarawak; and
3. the structural and legal integrity of the transaction.
TRANSACTION SUMMARY
The issuer uses the issuance proceeds of the trust certificates to acquire certain assets - primarily consisting of certain machinery and equipment (the assets) - from 1st Silicon (Malaysia) Sdn Bhd (the seller).
Pursuant to a declaration of trust, the issuer acts as trustee in respect of the trust assets for the benefit of the holders of the trust certificates. The trust assets include interest in the assets, the right and interest of the issuer in the transaction documents, and the balance in the transaction account.
The issuer leases the acquired assets to SEDC pursuant to a lease agreement under which SEDC pays semi-annual rental payments. On each distribution date prior to the last distribution date in December 2009, the semi-annual rental payment equals the periodic distribution payable on the trust certificates. On the last distribution date, SEDC will pay the rental payment for an amount equal to the sum of the trust certificates' periodic distribution and US$350 million in order for the issuer to meet the principal repayment on the trust certificates.
Upon an occurrence of certain dissolution events, the issuer may 1) exercise the option to sell the assets to 1st Asset Investment Inc. (1st Asset) - a special purpose company incorporated in Labuan, Malaysia - under the 1st Asset purchase undertaking deed, and 2) require 1st Asset to exercise its option to sell the assets to SEDC under the SEDC purchase undertaking deed.
At the same time, the issuer may terminate the lease agreement with SEDC. The latter will then make the lease termination payment to the issuer on the lease termination date. The issuer will use the collections from the exercise price together with the lease termination payment to repay the principal and the accrual periodic distribution on the trust certificates on the early dissolution date.
The certificate issuance proceeds enable the issuer to acquire the assets from the seller. The proceeds are used to refinance an existing Baa3 rated US$250 million floating rate secured notes issued by 1st Silicon (Labuan) Inc. and SEDC's existing debts through the Islamic bond market.
RATING RATIONALE
Moody's analysis of the credit risks associated with the trust certificates is primarily based on the ability and willingness of SEDC to fulfil its obligations under different transaction documents and the letter of support from the State Government of Sarawak. In particular, the rating highly correlates with the Baa3 foreign currency debt rating of SEDC.
The key transaction documents under which SEDC has payment obligations are:
1. the lease agreement under which SEDC will pay semi-annual lease rentals and will reimburse and indemnify the losses of the issuer arising from non-performance of the servicing agent;
2. the SEDC purchase undertaking deed under which SEDC will pay the exercise price upon an occurrence of certain dissolution events; and
3. the cost undertaking deed under which SEDC will pay the fees and expenses of the issuer and the transaction.
Other factors considered by Moody's include the structural and legal integrity of the transaction.
Moody's Investors Service is a publisher of rating opinions and research. It is not involved in the offering or sale of any securities, nor is it acting on behalf of the offering party. This release is not a solicitation or a recommendation to buy, hold or sell securities.
| | | | Collateral Type: | ABS - Other | | Closing Date: | 15 DEC 2004 | | Total Deal Size: | USD 350.00 M | | Tax Election: | N/A | | Pay Frequency: | Semi-ann | | Structure: | |
| | Master Servicer: | 1st Investment Capital Limited | | Originators: | Sarawak Economic Development Corporation | | Trustee(s): | Sarawak Corporate Sukuk Inc. | | Underwriters: | Noriba Bank, UBS Limited | | Ticker |
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