RAM Ratings Reaffirms Rating of MRCB Southern Link's Senior Sukuk
RAM Ratings Reaffirms Rating of MRCB Southern Link's Senior Sukuk
Mal
Mal
Transcription
- 10 /20/2016 Latest Announcement - (News ID : 2016101900024) Latest Announcement News ID : 2016101900024 Subject : MRCB Southern Link Berhad MRCB Southern Link Berhad Organisation Name: RAM RATING SERVICES BERHAD News Type: RATING ANNOUNCEMENT Reference Site: None Embargo Date: 19/10/2016 Embargo Time: 05:30 PM Expiry Date: 18/11/2016 Priority: Medium Summary: RAM Ratings reaffirms rating of MRCB Southern Link's Senior Sukuk, maintains negative outlook Attachments: No attachment available. Disclaimer: The user, including a user who is also a FAST Participant, expressly agrees that the use of this website which is accessible at https://fast.bnm.gov.my/ is at the user's sole risk. The information contained in this FAST website is compiled by MyClear Sdn. Bhd. (MyClear) and is provided on an "as is" basis without any representations or warranties of any kind, either expressed or implied. While MyClear makes every effort to ensure that information contained in the FAST website are accurate and disseminated in a timely and efficient manner, the user acknowledges that delays, errors, omissions or inaccuracies may occur. MyClear disclaims any liability pertaining to the consequences of any delays, errors, omissions or inaccuracies arising out of or relating to the FAST website or information, including but not limited to, any decision made or action taken by a user in reliance upon such information, or for damages suffered, whether direct, consequential, special, punitive, indirect or otherwise, notwithstanding having been advised of the possibility of such damages. In the event of any dispute, the official records of MyClear shall prevail. MyClear, Bank Negara Malaysia or any of its affiliates, officers, directors, agents or any other party involved in creating, producing or delivering the FAST website, shall not be liable for any direct, consequential, special, punitive, indirect, incidental or other damages arising out of or in any way connected with the use or inability to use the FAST website or information, whether based on contract, tort, liability or otherwise, even if advised on the possibility of any such damages. Content RAM Ratings has reaffirmed the rating of MRCB Southern Link Berhad's (MRCB Southern Link or the Company)'s RM845 million Senior Sukuk at BB3 with a negative outlook. While we remain concerned about the Company's strained liquidity position, the Bursa Malaysia announcement made on 14 October 2016 could pave the way for a longer term solution. In this announcement, Malaysian Resources Corporation Berhad (ultimate shareholder of MRCB Southern Link) received 2 indicative offers for the 8.62km Eastern Dispersal Link (EDL or the Expressway), one from PLUS Malaysia Berhad and another from an undisclosed client represented by ZJ Advisory Sdn Bhd to acquire its equity interest in MRCB Lingkaran Selatan Sdn Bhd (MRCB Lingkaran Selatan or the Concessionaire). Given the persistent mismatch between the Company's cash generating ability and annual debt repayments (owing to weak traffic volumes since commencement of tolling at the EDL), the rating of the sukuk could be downgraded in the coming months should the indicative buyout offers not materialise and/or the Company not make any headway in its refinancing plans. On that note, the Company had sought lenders approval to defer a principal payment under its term loan facility from July 2016 to November 2016, stemming from insufficiency of funds. Given the Company's persistent tight liquidity position, we do not discount further deferral of principal payments under the term loan. Despite this, we have been informed that the profit payments under the Senior Sukuk will continue to be paid on its due date. As at endSeptember 2016, the Company's cash balances stood at RM30.03 million. Coupled with the MRCB Southern Link's operating cashflow over the next few months, the Company should have sufficient internal funds to meet its dues under the term loan in November 2016. Thereafter, our analysis assumes the drawdown of the Company's RM59.35 million finance service reserve account bank guarantee to help allay the cash shortfalls in honouring its financial obligations till January 2018 (over the next 15 months), before again facing a cashflow shortfall in repaying its term loan. Any default on the term loan will result in a crossdefault on the Senior Sukuk as they rank pari passu in terms of cashflow and security. Lowerthanexpected traffic volumes since the commencement of tolling in August 2014 have undermined MRCB Lingkaran Selatan's projected toll revenue. Average daily traffic (ADT) on the Expressway came in marginally below expectations at 43,412 vehicles in 2015 (RAM's projection: 43,723 vehicles). ADT declined a further 1.6% to 42,716 vehicles for 9M 2016 and is anticipated to decrease by 1.8% in 2016 in view of the volatility of traffic. MRCB Southern Link is a funding conduit for the EDL. The Company's financial commitments will be supported by backtoback payments from MRCB Lingkaran Selatan. Recognising the strong credit link between the 2 entities, we view them in aggregate from a credit standpoint. Analytical contacts Media contact Chinthamani Thanneermalai Padthma Subbiah (603) 7628 1013 (603) 7628 1162 chinthamani@ram.com.my padthma@ram.com.my 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. Similarly, the disclaimers above also apply to RAM Ratings' creditrelated analyses and commentaries, where relevant. Published by RAM Rating Services Berhad © Copyright 2016 by RAM Rating Services Berhad https://fast.bnm.gov.my/fastweb/public/PublicInfoServlet.do?chkBox=2016101900024&mode=DISPLAY&info=NEWS&screenId=PB010400 1/1
Create FREE account or Login to add your comment