RAM Ratings has reaffirmed the AAA/Stable rating of SI Capital Sdn Bhd’s (SI Capital or the Company) RM167 million Bai’ Bithaman Ajil Islamic Debt Securities (2004/2017) (BaIDS).

Published on 18 June 2014

RAM Ratings has reaffirmed the AAA/Stable rating of SI Capital Sdn Bhd’s (SI Capital or the Company) RM167 million Bai’ Bithaman Ajil Islamic Debt Securities (2004/2017) (BaIDS).
SI Capital is indirectly owned by Sarawak Incorporated Sdn Bhd, a wholly-owned subsidiary of the State Financial Secretary of Sarawak (SFS). The redemption of the BaIDS is dependent on a stream of payments due from the State Government (the State) under 3 agreements – the Concession Agreement, the Lease Agreements and the Redeemable Preference Shares Agreement.
The reaffirmed rating reflects the strength of the agreements which govern the State’s payment obligations, the tight structural features and restrictive covenants of the financing facilities, as well as the predictability of SI Capital’s cashflow. Further, given that SI Capital has minimal performance obligations under the said agreements, it faces a low level of operational risk. Counterparty risk is also low, in view of the State’s superior fiscal position, backed by its solid revenue-generating ability and strong support from the Federal Government. However, these factors are balanced by the concentration of the State’s economy in the resource-based sector and its increasing debt burden.
Payments from the State under the respective agreements have been prompt, as is expected to be the case for the remaining tenure of the BaIDS. Going forward, the Company’s finance service coverage ratio is expected to be maintained at above 2 times – well above the 1.25 times stipulated as a covenant.

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Kathleen Por
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