RAM reaffirms Kesas’ sukuk rating, revises outlook to stable from negative

Published on 23 January 2013

RAM Ratings has reaffirmed the AA3 long-term rating of Kesas Sdn Bhd’s (“Kesas” or “the Company”) RM800 million Al-Bai’ Bithaman Ajil Islamic Debt Securities (“BaIDS”) (2002/2014) while revising its rating outlook to stable from negative. Kesas is the toll concessionaire for the 35-km Shah Alam Expressway (“the Highway”) under a concession agreement dated 19 November 1993.

RAM’s rating action follows the Government’s recent announcement that Kesas will receive an RM86 million cash compensation for non-revision of its toll rates in 2012. At the same time, toll rates for the Highway would be reduced effective 15 January 2013 while tariffs would not be raised until 2016 (the toll rate for Class 1 vehicles has already been lowered from RM2.20 to RM2.00). Despite the loss of monthly revenue from the reduced tariffs, the one-off cash compensation is expected to boost the Company’s cash coffers while improving its debt coverage. Moving forward, Kesas is expected to register respective minimum and average finance service coverage ratios of 1.4 times and 1.9 times (with cash balances, calculated on debt-repayment dates) throughout the remaining tenure of its BaIDS, compared to 1.2 times and 1.8 times expected during the rating review in October last year.   

Further to that, RAM has been made to understand that the compensation is expected to be received before the Company’s lumpy RM264 million repayment on the BaIDS in October 2013. In this regard, we expect Kesas to prioritise its debt obligations ahead of any distributions to its shareholders as this is imperative to preserving its debt-servicing ability. Any deviations from our current expectations will be reassessed for credit implications.

Media contact

Lee Chai Len

(603) 7628 1192

chailen@ram.com.my