RAM Ratings reaffirms AAA rating of SI Capital’s Islamic debt issue

Published on 13 July 2015

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).
The reaffirmed rating reflects the strength of the agreements which govern the payment obligations of SI Capital’s counterparty – the Sarawak State Government (the State)– the tight structural features and restrictive covenants of the financing facilities, as well as the predictability of the Company’s cashflow. The redemption of the BaIDS is dependent on a stream of payments due from the State under 3 favourable agreements – the Concession Agreement, Lease Agreements and the Redeemable Preference Shares Subscription Agreement.
Payments from the State under the respective agreements have been mostly within schedule and are expected to remain so for the remaining tenure of the BaIDS. These payments are not subject to any dispute or deduction and will be forthcoming even in the event of non-performance by SI Capital. Going forward, the Company’s finance service coverage ratio is anticipated to be maintained at above 2 times – well above the 1.25 times stipulated as a covenant.
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 strong fundamentals, backed by its strong financial performance, the availability of natural resources and large-scale projects in the pipeline. However, these factors are balanced by Sarawak’s sizeable debt burden, the State’s overdependence on commodity-based revenue and its lagging overall development.
SI Capital is indirectly owned by Sarawak Incorporated Sdn Bhd, a wholly owned subsidiary of the State Financial Secretary of Sarawak.

Media contact
Kathleen Por
(603) 7628 1015
kathleen@ram.com.my