RAM Ratings reaffirms AA2 ratings of Litrak’s Sukuk

Published on 30 October 2012

RAM Ratings has reaffirmed the AA2 ratings of Lingkaran Trans Kota Sdn Bhd’s (“Litrak” or “the Company”) Sukuk Musharakah Islamic Medium-Term Notes I Programme (“IMTN I”) of up to RM1.15 billion (2008/2023) and Sukuk Musharakah Islamic Medium-Term Notes II Programme (“IMTN II”) of up to RM300 million (2008/2023) (to be collectively referred to as “the Sukuk”); both the long-term ratings have a stable outlook. Concurrently, we have withdrawn the P1 rating on the Company’s Islamic Commercial Papers Programme of up to RM100 million following confirmation that the facility’s validity period had lapsed.

Litrak is the toll concessionaire for the 40-km intra-urban Lebuhraya Damansara-Puchong (“LDP” or “the Highway”). The Company’s strong business profile is backed by the LDP’s strategic alignment straddling the densely-populated areas of Puchong, Sunway, Petaling Jaya, Damansara and Kepong. Owing to traffic disruptions along certain stretches of the Highway as a result of road enhancement works (which have been largely completed), the LDP’s traffic volume remained flat, with average daily traffic of 447,563 vehicles in FYE 31 March 2012 (“FY Mar 2012”) (+0.42% year-on-year).

Based on RAM Ratings’ sensitised cashflow projections, Litrak’s average pre-financing cashflow is projected to come up to around RM240 million per annum, translating into finance service coverage ratios (“FSCR”) (with cash balances, post-distribution) on principal payment dates of at least 2 times. Our assessment assumes that the Company will adhere to its financial covenants and the FSCR on principal payment dates throughout the tenure of the Sukuk (i.e. on a forward-looking basis, as opposed to only the year of assessment). Meanwhile, we expect Litrak to curtail distribution to its shareholders in the immediate 2 fiscal years (2013 and 2014), given the heavy capital expenditure for road enhancement works and the uptick in its annual debt repayment beginning FY Mar 2013.

The ratings are moderated by the possible threat to the LDP’s traffic profile over the longer term, stemming from the proposed extension of the existing Light Rail Transit and proposed new highways that run parallel to stretches of the LDP i.e. the Kinrara-Damansara Highway and the Kinrara-Serdang-Putrajaya Highway. Notably, Litrak’s debt-servicing ability would have to be reassessed when more details on the requisite approval for construction, alignments and tolling structure of these competing roads become available. Like other toll-road projects, the ratings remain moderated by regulatory risk and single-project risk.

Media contact

Jocelyn Chiang

(603) 7628 1124

jocelyn@ram.com.my