RAM Ratings has reaffirmed the C2/Stable rating of Lebuhraya Kajang-Seremban Sdn Bhd’s (LEKAS or the Company) RM633 million Junior Sukuk Istisna’ (Junior Sukuk) (2007/2025).

Published on 13 January 2017

RAM Ratings has reaffirmed the C2/Stable rating of Lebuhraya Kajang-Seremban Sdn Bhd’s (LEKAS or the Company) RM633 million Junior Sukuk Istisna’ (Junior Sukuk) (2007/2025). The rating takes into consideration the low likelihood of repayment of the Junior Sukuk as well as its deeply subordinated position to the Company’s other debt obligations, i.e., its Redeemable Convertible Secured Islamic Debt Securities and Syndicated Term Loan (STL). LEKAS holds the concession for the 44-km Kajang-Seremban Highway (KSH or the Highway), valid until May 2039.

During the review period, a toll-rate hike, effective 15 October 2015, as per the Concession Agreement between the Government of Malaysia and LEKAS, had resulted in a 12.06% y-o-y contraction in long-haul traffic on KSH and a 2.73% revenue dip in FY Mar 2016. Although this was partially offset by a 19.80% y-o-y increase in short-haul traffic, the fall in both long-haul traffic and revenue were greater than expected. As LEKAS is a closed-toll expressway (where toll charges are dependent on distance travelled), fewer long-distance commuters accordingly led to a decline in revenue and earnings. Half of the Company’s revenue from Class 1 vehicles (vehicles with 2 axles excluding taxis) was accounted for by long-haul traffic, from which the Company derives the bulk of its revenue. Due to the mismatch between LEKAS’s annual cash-generating capacity and the lumpy one-off repayment of the RCSIDS in April 2023, we continue to expect the Company to refinance its RCSIDS upon maturity.

As with most concession-related projects, the Company is exposed to regulatory and single-project risks.

Analytical contact
Ong Ju Laine
(603) 7628 1183
julaine@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my