Rating of LEKAS’s Junior Sukuk downgraded subsequent to refinancing exercise

Published on 22 October 2013

RAM Ratings has received confirmation from Malaysian Trustees Berhad that Lebuhraya Kajang-Seremban Sdn Bhd (LEKAS or the Company) had refinanced its RM785 million Senior Sukuk Istisna’ financing facility (Senior Sukuk) on 10 October 2013, via proceeds from a syndicated term loan (STL) and redeemable convertible secured Islamic debt securities (RCSIDS). As the original facility has been cancelled, we no longer have any rating obligation in respect of the Senior Sukuk, which had been previously rated BB1/Negative/-.

Concurrently, we have downgraded the rating of LEKAS’s RM633 million Junior Sukuk Istisna’ (Junior Sukuk) to C2/Stable/- (from B1/Negative/-) to reflect a very low likelihood of the Company meeting scheduled repayments under the Junior Sukuk as well as the instrument’s subordinated position. Following the refinancing of the Senior Sukuk, the terms of LEKAS’s Junior Sukuk have been revised such that the STL is required to be fully settled, followed by a full repayment of the RCSIDS, before the Junior Sukuk can be repaid.

Owing to a mismatch in cash generation and the lumpy repayment of the RCSIDS, our assessment indicates that LEKAS will need to refinance the RCSIDS at their maturity. Pending the full repayment of the RCSIDS, the Company will not be permitted to meet its scheduled repayments under the Junior Sukuk, which commence in June 2023.

This rating announcement follows our last rating action on 2 October 2013.

Media contact

Adeline Poh

(603) 7628 1021

adeline@ram.com.my