RAM Ratings reaffirms AAA ratings of Prasarana’s government-guaranteed bonds

Published on 07 May 2012

RAM Ratings has reaffirmed the AAA ratings of Syarikat Prasarana Negara Berhad’s (“Prasarana” or “the Group”) RM1.0 billion Nominal Value Redeemable Guaranteed Coupon-Bearing Bonds (2002/2022) and RM5.468 billion Nominal Value Redeemable Guaranteed Serial Fixed-Rate Bonds (2003/2016) (collectively known as “the Bonds”); the long-term ratings have a stable outlook.

The ratings reflect the strategic importance of Prasarana as an asset owner and operator of key public-transport infrastructure. Prasarana – a wholly owned subsidiary of the Government of Malaysia (via Minister of Finance, Incorporated) – operates on a non-commercial basis and relies on grants and other government-backed funding. In respect of the Bonds, the explicit support of the Government is evidenced by an irrevocable and unconditional guarantee. Based on our Rating Approach for Government-Linked Entities (“GLEs”), Prasarana is viewed as a dependent entity. As such, the credit risk of Prasarana mirrors that of the Government. For further details, please refer to RAM Ratings’ Rating Approach for GLEs, published in August 2011.

Prasarana had been incorporated as part of the Government’s initiative to restructure the public transportation systems in the Klang Valley and Penang. Through its subsidiaries, the Group owns and operates the major modes of public transport in Kuala Lumpur and Penang, including the Klang Valley Light Rail Transit (“LRT”) systems, the KL Monorail and the bus fleets servicing these 2 cities. Meanwhile, the ownership of the upcoming My Rapid Transit (“MRT”) system in the Klang Valley, which had initially been assigned to Prasarana, was transferred to MRT Co on 1 September 2011. Nevertheless, the Group’s subsidiary, Rangkaian Pengangkutan Integrasi Deras Sdn Bhd (“RapidKL”), will operate the MRT upon completion.

Moving forward, Prasarana will be spearheading the Government’s RM35 billion plan to improve the public transport system, particularly the extension of the Kelana Jaya and Ampang LRT lines. At the same time, Prasarana is expected to expand its revenue base via property development; the Group recently formed a joint venture with Crest Builder International Sdn Bhd and Detik Utuh Sdn Bhd to build a mixed commercial development comprising a retail mail, upscale premium serviced residential suites, a hotel and offices on top of the Dang Wangi LRT station in Kuala Lumpur.

As an owner and operator of key public-transport infrastructure, Prasarana plays a critical role in the Government’s initiatives to improve public transportation facilities; their relationship is viewed to be very strong. Given the Group’s strategic importance and its full ownership by the Government, Prasarana should be able to derive substantial financial flexibility from the Government.

Media contact
Woon Tien Ern
(603) 7628 1040
tienern@ram.com.my