In the context of its strategic role pursuant to the Water Services Industry Act 2006 (WSIA), PAAB
shoulders a heavy debt load after taking over loans extended to the respective states by the Federal Government as well as the Group's Sukuk issues, which include both the IMTN/ICP programmes and a Government Guaranteed Programme.
For these purposes, PAAB will have to rely on external funding almost exclusively, backed by the GoM's implicit and extraordinary support if or when required.
Under the transaction structure, the Sukuk holders' recourse to PAAB is recognised via an irrevocable and unconditional Purchase Undertaking Deed.
Notably, PAAB has been covenanted as a directly or indirectly 100 per cent-owned subsidiary of the Government at all times.
PASB is a special-purpose vehicle set up as a 100 per cent-owned subsidiary of PAAB, to finance the latter's acquisition of water assets and accompanying liabilities in Peninsular Malaysia and Labuan, as well as the subsequent development of water infrastructure in the states involved.
In this regard, we recognise the strong credit link between the SPV and PAAB
, and thus view both companies in aggregate from a credit perspective.