RAM Ratings reaffirms New Pantai Expressway's debt ratings

Published on 18 November 2011
RAM Ratings has reaffirmed the respective AA3 and AA3(s) ratings of New Pantai Expressway Sdn Bhd’s (“NPESB” or “the Company”) RM490 million Senior Bai’ Bithaman Ajil Notes (2003/2014) (“Senior Notes”) and RM250 million Junior Bai’ Bithaman Ajil Notes (2003/2016) (“Junior Notes”); both the long-term ratings have a stable outlook. NPESB holds the concession for the construction, maintenance and toll collections of the 19.6-km New Pantai Highway (“NPH” or “the Highway”).
The rating of the Senior Notes remains supported by strong debt-coverage levels and the sustainable traffic-volume growth of the Highway, backed by established townships. In FY Mar 2011, average daily traffic (“ADT”) on the Highway climbed up 9.2% year-on-year (“y-o-y”) to 141,290 vehicles, buoyed by robust traffic flows at all 3 toll plazas - Pantai Dalam, PJS 2 and PJS 5. The positive momentum extended into 1Q FY Mar 2012, when ADT went up 8.8% y-o-y to 153,756 vehicles. Moving forward, NPESB is expected to maintain its robust debt-coverage levels, with projected minimum and average Senior Finance Service Coverage Ratios (“FSCRs”) of 2.00 times and 2.11 times (with cash balances, post-distribution), respectively, on payment dates.

Meanwhile, the enhanced rating of the Junior Notes reflects the strength of the corporate guarantee from IJM Corporation Berhad (NPESB’s ultimate holding company), pursuant to the Payment Guarantee that unconditionally and irrevocably guarantees the Junior Notes. Since the corporate guarantee is only applicable while the Senior Notes are still outstanding, the rating of the Junior Notes will revert to the stand-alone rating upon full redemption of the Senior Notes on 31 October 2014.
After the full redemption of the Senior Notes, NPESB’s buffer is expected to weaken when servicing the principal repayment on the Junior Notes, with Junior FSCRs (with cash balances, post-distribution) on payment dates of 1.35 times (fiscal 2016) and 1.27 times (fiscal 2017) due to its lumpy debt repayment of about RM120 million per annum. Given NPESB’s weaker debt coverage compared to its AA3-rated peers, we highlight that the Company’s ability to redeem the Junior Notes will be weakened if it decides to make distributions to its shareholder. Nonetheless, the credit metrics of the Junior Notes could improve if the Highway’s future traffic performance comes in above expectations. Similar to other toll-road concessionaires, however, NPESB is also exposed to regulatory and single-project risks.

Media contact
Lawrence Leong
(603) 7628 1187
lawrence@ram.com.my