Published on 24 June 2013
RAM Ratings has reaffirmed the AAA rating of SI Capital Sdn
Bhd’s (“SI Capital” or “the Company”) RM167 million Bai’ Bithaman Ajil Islamic
Debt Securities (2004/2017) (“BaIDS”); the long-term rating has a stable
outlook.
SI Capital is indirectly owned by Sarawak Incorporated Sdn Bhd,
which is in turn a 100%-held subsidiary of the State Financial Secretary of
Sarawak (“SFS”). The redemption of the BaIDS ultimately depends on the stream
of payments due from the Sarawak State Government (“the State”), under 3
agreements between the SFS and SI Capital, i.e. the Concession Agreement, the
Lease Agreement and the Redeemable Preference Shares Agreement.
The rating takes into consideration the highly predictable
cashflows backed by the said agreements, the credit strength of the Company’s
counterparty (the State), and the tight transaction structure as well as
restrictive covenants of the BaIDS, which minimise cashflow leakage and
safeguard the Company’s debt-servicing ability. “Given that SI Capital has
minimal performance obligations under the various agreements, the rating
essentially reflects its counterparty risk, which is deemed low as the State
has a strong credit profile. This is underpinned by Sarawak’s healthy fiscal
performance, superior liquidity position and supportive relationship with the
Federal Government, although balanced by the concentration of the State’s
economy in the resource-based sector and its increasing debt burden,” explains
Thong Mun Wai, RAM’s Head of Real Estate and Construction Ratings.
Notably, payments from the State to SI Capital have been prompt,
typically received a few days before the due date – a status quo which is
envisaged to be maintained. Going forward, the Company’s projected debt service
coverage ratio is expected to be kept above 2 times throughout the tenure of
the BaIDS – well above the 1.25 times stipulated in the covenant.
Media contact
Jason Tan
(603) 7628 1030
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