RAM Ratings reaffirms LEKAS’s Senior and Junior Sukuk ratings, with negative outlook

Published on 04 January 2013

RAM Ratings has reaffirmed its ratings of Lebuhraya Kajang-Seremban Sdn Bhd’s (“LEKAS” or “the Company”) RM785 million Senior Sukuk Istisna’ (“Senior Sukuk’”) and RM633 million Junior Sukuk Istisna’ (“Junior Sukuk’”) at BB1 and B1, respectively; the outlook on the ratings remains negative. LEKAS is the highway concessionaire for the 44-km Kajang-Seremban Highway (“KSH” or “the Highway”) until May 2039; full tolling operations commenced on 21 September 2010.

The ratings of the Senior and Junior Sukuk continue to reflect low safety for payment on the respective financial obligations. Given the persistent mismatch between LEKAS’s cashflow generation and its financing obligations, the Company would still not have sufficient cash reserves to fully meet the first principal repayment on the Senior Sukuk of RM40 million, due in June 2014 (in 18 months). The rating difference between the Senior and Junior Sukuk is premised on the latter’s subordination in terms of cashflow priority and security.

The rating outlook signals further rating pressure if the management’s current refinancing plan fails to materialise within the next few months. Notably, the Company has made significant progress in the refinancing of the Senior Sukuk since the last rating review. The plan entails a refinancing and full redemption of the Senior Sukuk via a RM400 million Syndicated Term Loan (“STL”) and RM263 million of Redeemable Convertible Unsecured Loan Stocks. We understand that the term sheet for the STL has been finalised, with the entire exercise targeted for completion by end-February 2013. RAM Ratings will continue to closely monitor developments in this regard. Meanwhile, refinancing plans for the Junior Sukuk remain inconclusive at this juncture.

Media contact

Adeline Poh

(603) 7628 1021

adeline@ram.com.my