RAM Ratings withdraws Kencana’s ratings, assigns AA3 rating to SapuraKencana

Published on 17 May 2012

Following the finalisation of the merger between Kencana Petroleum Berhad (“Kencana”) and SapuraCrest Petroleum Berhad (“SapuraCrest”) on 15 May 2012, RAM Ratings has withdrawn the AA3 ratings of Kencana’s RM700 million Sukuk Mudharabah Programme (2011/2026) (“Sukuk Mudharabah”) and proposed RM350 million Sukuk Mudharabah (with detachable warrants) (“Sukuk Mudharabah-W”). Concurrently, we have assigned the AA3 rating of the Sukuk Mudharabah to SapuraKencana Petroleum Berhad (“SapuraKencana” or “the Group”); the long-term rating has a stable outlook.

Pursuant to the merger, the Sukuk Mudharabah has been novated to SapuraKencana; the latter has assumed the repayment responsibility on the Sukuk Mudharabah. Meanwhile, the proposed Sukuk Mudharabah-W has been aborted.

To recap, RAM Ratings reaffirmed the AA3 rating of the Sukuk Mudharabah on 23 March 2012, on the premise that the then-proposed merger would be successfully completed. Moving forward, the Group is expected to clinch more turnkey engineering, procurement, construction, installation, and commissioning projects on the international scene. SapuraKencana, along with other local providers of oil and gas support services, also benefits from the favourable policies implemented by the Government and Petroliam Nasional Berhad. On the flipside, we note that the Group shoulders a hefty debt burden, with considerable complexity when attempting to integrate the businesses of the 2 sizeable entities. For more details, please refer to RAM Ratings’ rationale on Kencana, published on 30 March 2012.

Media contact
Low Li May
(603) 7628 1175
limay@ram.com.my