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

Published on 03 May 2017

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

The reaffirmation reflects the strength of the agreements which govern concession payments from the Sarawak State Government (the State) to SI Capital. The Company is entitled to a stream of predictable cash payments under the favourable terms of its 3 agreements – Concession Agreement, Lease Agreements and Redeemable Preference Shares Subscription Agreement – with the State. 

Timely payments from the State under the agreements have allowed SI Capital to build up a large cash pile, which will sufficiently cover the last 2 profit and principal payments (amounting to RM17.85 million) on the BaIDS. These payments are not subject to any dispute or deduction and must be made even in the event of non-performance by SI Capital. Meanwhile, the Company’s finance service coverage ratio is anticipated to stay above 2 times – well above the covenanted minimum of 1.25 times. 

Given its minimal performance obligations under the said agreements, SI Capital faces a low level of operational risk. The Company’s exposure to counterparty risk is also minimal as the ultimate obligor of concession payments is the State. Sarawak’s strong fundamentals are underpinned by the State’s strong financial performance, the availability of natural resources and large-scale projects in the pipeline as well as the supportive relationship it shares with the Federal Government. However, these factors are balanced by Sarawak’s sizeable debt burden, its overdependence on commodity-based revenue and the State’s lagging overall development.

Set up to raise the BaIDS, SI Capital is indirectly owned by Sarawak Incorporated Sdn Bhd, a wholly owned subsidiary of the State Financial Secretary of Sarawak. In return for constructing and maintaining government office complexes and residential quarters in Kapit, Mukah and Betong, the Company will receive RM17.02 million of annuity payments over 15 years. Meanwhile, SI Capital has entered into two 15-year Lease Agreements with the State for the rental of Menara Pelita and 46 strata-titled units in Wisma Pelita Tunku. 

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

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