MARC has affirmed the rating of AAA(fg)
on special purpose vehicle TRIplc Ventures Sdn Bhd’s (TVSB) RM240.0 million
Senior Medium Term Notes (Senior MTN) Programme with a stable outlook.
The rating and outlook reflect the credit strength of an unconditional and
irrevocable guarantee on the Senior MTN obligations provided by Danajamin
Nasional Berhad (Danajamin) which carries a financial insurer rating of
AAA/stable from MARC.
Wholly owned by TRIplc Berhad (TRIplc), TVSB holds a
23-year build-operate-transfer concession under a private finance
initiative/public private partnership project to construct and maintain
facilities in Zone 1 Phase 2 (Z1P2) of Universiti Teknologi MARA’s (UiTM)
campus in Puncak Alam, Selangor. The construction phase was completed on April
11, 2014 as per schedule, while the 20-year maintenance phase has commenced
with the issuance of Certificate of Acceptance by UITM. The lessee of the
facilities in Z1P2, UITM has begun making availability charges (AC) and
maintenance charges (MC) to TVSB, both of which form the source of repayment of
the Senior MTN.
MARC deems the quantum of these payments under the
concession agreement as sufficient to meet the principal and interest payments
of the Senior MTN. TVSB’s standalone credit hinges on the company’s ability to
meet performance requirements during the maintenance phase, and the timely
receipt of payments from UiTM, which is funded by the Ministry of Higher Education.
The rating agency notes that any administrative issue that could lead to a
delay in AC and/or MC payments is moderated by the minimum required balance
maintained in the debt service reserve account. The AC payments are fixed at
RM42.5 million per annum throughout the concession tenure while the MC payments
are subject to review every five years and conditional upon TVSB meeting
specified key performance indicators (KPI). For the financial year ended May
31, 2015 (FY2015), TVSB managed to comply with the KPI imposed by UiTM,
registering a 99.95% compliance with only RM7,000 deducted from the total MC
payment.
Following the completion of construction in FY2014,
TVSB registered revenue of RM16.3 million in FY2015. Its operating profit
before interest and tax (OPBIT) and OPBIT interest coverage stood at RM39.6
million and 2.10 times respectively. With the full-year receipt of the AC and
MC payments, TVSB registered positive cash flow generated from operations (CFO)
of RM35.7 million (FY2014: negative RM70.5 million) and free cash flow (FCF) of
RM25.6 million (FY2014: negative RM70.9 million). The company’s FCF generation
turned positive, as a result of improved cash generation coupled with lower
capital expenditure. This led to a higher cash balance of RM56.0 million
compared to RM33.8 million in FY2014. The available cash balances would be
primarily used for meeting Senior MTN interest payments of RM13.5 million and
to finance total trade payables amounting RM18.3 million in FY2016. Meanwhile,
its debt-to-equity ratio has been on a downward trend on the back of increasing
retained earnings.
The base case pre-distribution minimum and average
debt service cover ratio (DSCR) of 1.80 times and 2.37 times respectively for
the remaining tenure of the Senior MTN provide a moderate buffer for any
underperformance during the maintenance phase. The weakest post-distribution
DSCR is seen in FY2023, following cumulative dividend distribution of RM95
million up to FY2023. The project is expected to generate, on average, annual
FCF of RM54.3 million throughout the Senior MTN tenure, with the highest Senior
MTN debt obligation of RM35.6 million occurring in FY2017. However, the company
needs to preserve its cash buffer during the initial operational phase in order
to remain in compliance with its covenanted post-distribution DSCR of 1.50
times. In the event the concession is terminated due to the non-performance of
TVSB, UiTM will pay the concession company the outstanding amounts of TVSB’s
loans obtained for the purpose of constructing the facilities.
Noteholders are insulated from any downside risks in
the project’s credit profile by virtue of Danajamin’s unconditional and
irrevocable guarantee. Any changes in the supported rating or rating outlook
will hinge largely on changes in Danajamin’s credit strength.
October 30, 2015
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