KUALA LUMPUR (Jan 13): RAM Ratings said it does not expect cuts in government funding for public universities to have any impact on rated private-finance-initiative (PFI) concessions with public universities as the paymasters.

The rating agency said in a statement today that although the International Islamic University Malaysia (IIUM) and Universiti Teknologi MARA (UiTM) are the paymasters for two of its rated concession companies, both concessionaires are deemed to face minimal counterparty risk given that the Government of Malaysia (GOM) is the ultimate obligor, with availability charges forming part of the GOM’s budget.

“More importantly, the availability charges are separate from the universities’ operating expenditure budget and usage of funds from the GOM is governed by strict internal procedures. Hence, monies disbursed for concession payments cannot be used by the universities for other purposes,” it added.

Within RAM Ratings portfolio of PFI transactions, Sasaran Etika Sdn Bhd (SESB) and UniTapah Sdn Bhd (UniTapah) receive concession payments from IIUM and UiTM for the completion of residential colleges and a campus, respectively.

To date, payments of availability charges to the concessionaires have been timely, with UniTapah and SESB having received payments up to November and December 2016.

SESB’s RM220 million Fixed Rate Serial Bonds (2012/2027) are rated AA1/stable while UniTapah’s Sukuk Murabahah of up to RM600 million (2014/2035) carries a AA2/positive rating.

Budget 2017 had reduced allocations for the operating expenditure of IIUM and UiTM for this year by a respective 23% and 25% year-on-year subsequent to cuts of 8% and 24%, respectively, in 2016.