RAM Ratings lifts Rating Watch on Cerah Sama’s Sukuk rating; reaffirms AA3 rating

Published on 31 October 2012

RAM Ratings has lifted the developing Rating Watch on Cerah Sama Sdn Bhd’s (“Cerah Sama” or “the Group”) first issuance of RM380 million under the RM600 million Islamic Medium-Term Notes (“Sukuk”) Programme (2007/2025), and reaffirmed its long-term AA3 rating with a stable outlook. Cerah Sama is an investment-holding company that wholly owns Grand Saga Sdn Bhd (“Grand Saga”) – operator of the Cheras-Kajang Highway (“the Highway”).

The rating action is premised on the Group’s commitment to retaining cash in its coffers from the compensation awarded to it by the Government in relation to the closure of one bound at each of the two toll plazas along the Highway effective 2 March 2012. Management has deposited RM60 million of the cash compensation received this year, into the Finance Service Reserve Account, while the balance of RM60.55 million is expected to be deposited upon receipt in 2013. Furthermore, Cerah Sama had also issued a letter to the Trustee to formally commit to cease distributions to its shareholders until a refinancing exercise, which is currently being undertaken, is completed by end January 2013. This is in line with a resolution by the Group’s board of directors to do the same. With the full retention of the cash compensation, Cerah Sama’s Finance Service Coverage Ratios (with cash balances, post-distribution, calculated on payment date) are expected to be maintained at a minimum of 2 times for the duration of the Sukuk.

Nevertheless, the Group had made an investment, which is permitted under the terms of its financing documents. We note that the amount is immaterial and management has represented that there will be no further investments going forward. All said, any significant investment may alter Cerah Sama’s business and financial profiles, RAM Ratings will reassess the Group’s credit standing in any such event.

Media contact

Michael Ti

(603) 7628 1015

michael@ram.com.my