RAM Ratings revises outlook of Rating Watch on MRCB Southern Link’s Senior and Junior Sukuk ratings, from negative to positive

Published on 20 December 2012

RAM Ratings has revised the outlook of the Rating Watch on the C3 ratings of MRCB Southern Link Berhad’s (“MRCB Southern Link” or “the Company”) RM845 million Secured Senior Sukuk (2008/2025) (“Senior Sukuk”) and RM199 million Junior Sukuk (2008/2027) (“Junior Sukuk”), from negative to positive. MRCB Southern Link is a funding conduit for the 8.1-km Eastern Dispersal Link Expressway (“EDL” or “the Highway”) in Johor Bahru. The Highway has been opened to the public since 1 April 2012, although toll collection has not commenced as per the terms of its concession agreement.

The rating action is premised on the Government’s commitment to the implementation of an interim solution to ease MRCB Southern Link’s liquidity position, pending finalisation of the proposed buyout of the EDL by the Government. Following this, the Company has confirmed that its current cash holdings has been boosted to RM109 million (from RM21 million during the last rating announcement on 23 November 2012), which will enable it to meet the respective RM31 million and RM10 million profit payments on the Senior and Junior Sukuk on 24 December 2012. Previously, both ratings had been downgraded to C3 and placed on negative Rating Watch due to the Company’s cash shortfall that had precluded the meeting of this deadline for its debt obligations. Looking ahead, the ratings could be upgraded within the next few months upon materialisation of the full scope of the interim solution. 

RAM Ratings' Rating Watch highlights a possible change in an issuer's sukuk rating. It focuses on identifiable events such as mergers, acquisitions, regulatory changes and operational developments that place a rated sukuk under special surveillance by RAM Ratings. In a broader sense, it covers any event that may result in changes in the risk factors relating to the repayment of principal and interest.

Issues will appear on RAM Ratings' Rating Watch when some of the above events are expected to or have occurred. Appearance on RAM Ratings' Rating Watch, however, does not inevitably mean that the rating will be changed. It only means that a rating is under evaluation by RAM Ratings and a final affirmation is expected to be announced. A "positive" outlook indicates that a rating may be raised while a "negative" outlook indicates that a rating may be lowered. A “developing” outlook refers to those unusual situations in which future events are so unclear that the rating may potentially be raised or lowered.

Media contact

Michael Ti

(603) 7628 1015

michael@ram.com.my