FW: RAM Ratings reaffirms A1/Stable rating of Special Power Vehicle's Class A IMTN

 

Published on 24 Jan 2018.

RAM Ratings has reaffirmed the A1/Stable rating of Special Power Vehicle Berhad’s (SPV or the Company) RM800 million Class A IMTN Facility (2005/2022) (Class A IMTN). The rating reflects the continued receipt of sturdy payments from proceeds of Jimah Energy Ventures Sdn Bhd’s (JEV) RM895 million Junior Debt. As SPV is purely an investment-holding company, it relies solely on residual cashflow from JEV (rated AA3/Stable) – an independent power producer (IPP) that owns a 1,400-MW coal-fired power plant in Port Dickson, Negeri Sembilan. 

Notwithstanding lower payments from JEV, given operational issues encountered during the review period and higher tax payments from FY Dec 2016 onwards which had resulted in reduced cash retention within SPV and JEV, the Group’s minimum subordinated finance service coverage ratio (sub-FSCR, with cash balances, post-distribution, calculated on payment dates) is expected to be maintained at 1.15 times going forward, at the expense of diminished payments on its unrated RM215 million Class B IMTN. This is after assuming a proposed cash dividend distribution of RM49.94 million by JEV to its shareholders, an equivalent amount of which would be sourced from the partial settlement of sums owing from Jimah O&M Sdn Bhd (JOM) by mid-December 2017. Should the said dividends be distributed without a corresponding inflow from JOM, the Group’s sub-FSCR profile would be negatively impacted, resulting in downward pressure on the rating of SPV’s Class A IMTN.

The rating of SPV’s sukuk has been notched down from that of JEV’s, as the former is subordinated to the latter in terms of both cashflow waterfall and security. Given that SPV’s sukuk exhibits more debt-like features, it is deemed to have a low level of subordination, and hence, supports a narrower gap between its rating and that of JEV’s sukuk.

SPV’s debt-servicing ability in respect of the Class A IMTN will be impaired in the event of a failure on JEV’s part to fulfil its Junior Debt obligations in full and in a timely manner due to greater-than-expected deterioration in its operating performance, capex that was higher than expected and larger-than-anticipated distributions to the IPP’s shareholders, coupled with a Class B IMTN distribution by the Company throughout the remaining tenure of the Class A IMTN. 

 

Analytical contact
Adeline Poh
(603) 7628 1021
adeline@ram.com.my

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