RAM Ratings Reaffirms Rating of Lekas's Sukuk

Transcription

1. IB Press Release Service Published onIslamicBanker .com Publications: https://www.islamicmarkets.com/publications RAM Ratings Reaffirms Rating of Lekas's Sukuk 13 January 2017 Kuala Lumpur: RAM Ratings has reaffirmed the C2/Stable rating of Lebuhraya KajangSeremban Sdn Bhd's (LEKAS or the Company) RM633 million Junior Sukuk Istisna' (Junior Sukuk) (2007/2025). The rating takes into consideration the low likelihood of repayment of the Junior Sukuk as well as its deeply subordinated position to the Company's other debt obligations, i.e., its Redeemable Convertible Secured Islamic Debt Securities and Syndicated Term Loan (STL). LEKAS holds the concession for the 44-km Kajang-Seremban Highway (KSH or the Highway), valid until May 2039. During the review period, a toll-rate hike, effective 15 October 2015, as per the Concession Agreement between the Government of Malaysia and LEKAS, had resulted in a 12.06% y-o-y contraction in long-haul traffic on KSH and a 2.73% revenue dip in FY Mar 2016. Although this was partially offset by a 19.80% y-o-y increase in short-haul traffic, the fall in both long-haul traffic and revenue were greater than expected. As LEKAS is a closed-toll expressway (where toll charges are dependent on distance travelled), fewer long-distance commuters accordingly led to a decline in revenue and earnings. Half of the Company's revenue from Class 1 vehicles (vehicles with 2 axles excluding taxis) was accounted for by long-haul traffic, from which the Company derives the bulk of its revenue. Due to the mismatch between LEKAS's annual cashgenerating capacity and the lumpy one-off repayment of the RCSIDS in April 2023, we continue to expect the Company to refinance its RCSIDS upon maturity. As with most concession-related projects, the Company is exposed to regulatory and singleproject risks. The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security's market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations. RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings' credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
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