MARC has affirmed its AAAID(s) rating on Sarawak Specialist Hospital & Medical Centre Sdn Bhd's (SSHMC) RM 425 million Istisna' Serial Bonds. The rating carries a stable outlook. The issuer is a 100%-owned subsidiary of SSHMC Holdings and Management Sdn Bhd (SSHMC Holdings), which in turn is wholly-owned by the State Financial Secretary (SFS). The rating reflects the SFS' irrevocable and unconditional obligation to subscribe to non-cumulative redeemable preference shares (RPS) in SSHMC Holdings, the proceeds of which provide the underlying source of debt service for the bonds.
The rating on the bonds has been affirmed following MARC's review of its public information rating on the state of Sarawak which the rating agency has affirmed at AAA with a stable outlook. The rating on Sarawak reflects the state's strong fiscal performance, low debt burden and fairly strong financial management practices. MARC considers SFS' obligations as obligations of the state on the basis of its status as the State Financial Authority and its associated responsibility for the financial management of the state.
SSHMC had issued eight tranches of bonds amounting to RM425 million to fund the construction of Sarawak International Medical Centre (SIMC) and the purchase of hospital equipment. The construction of the hospital began in 2003, but was only completed in January 2011. The 166-bed hospital is now operated by the Sarawak General Hospital (SGH) as the Sarawak General Hospital Heart Centre (SGHC).
To date, SSHMC has redeemed RM248 million of Istisna' Bonds with proceeds from RPS issuances to SSHMC Holdings. The parent's sub!--ions of RPS are funded by mirror issuances of RPS to the SFS. Consequently, the credit profile for the bonds does not depend on the operating and financial performance of the hospital. As of September 30, 2011, SSHMC has total outstanding of RM177 million bonds, with the last series of bonds maturing in September 2014.
Given that the AAAID(s) issue rating is driven by government support for SSHMC's obligations on the bonds through SFS' sub!--ions of RPS in its parent, the rating and outlook would mirror any potential change in MARC's public information rating and rating outlook on Sarawak.
