KUALA LUMPUR: RAM Rating Services Bhd has reaffirmed the respective AA3 and A2 ratings of MRCB Southern Link Berhad's (MRCB Southern Link or the Company) RM845 million Secured Senior Sukuk (Senior Sukuk) and RM199 million Junior Sukuk (Junior Sukuk), with a stable outlook. The Senior and Junior Sukuk will collectively be referred to as 'the Sukuk'.
Below is the report issued by RAM Ratings on Thursday, July 1.
MRCB Southern Link is wholly owned by MRCB Lingkaran Selatan Sdn Bhd (MRCB Lingkaran Selatan or the Concessionaire) - the concessionaire for the proposed Eastern Dispersal Link Expressway (EDL or the Project) in Johor Bahru.
The Company has raised funds via the Sukuk and a syndicated transferable term loan of up to RM220 million for the development of the toll-road project, with financial commitments on these instruments to be supported by back-to-back payments from the Concessionaire once tolling operations start.
Meanwhile, the security package ensures that the sukuk holders have full and direct recourse to the Concessionaire. In this regard, RAM Ratings duly recognises the strong credit link between MRCB Southern Link and MRCB Lingkaran Selatan; as such, we view both companies in tandem from a credit standpoint.
Meanwhile, the Project has a unique tolling concept, where all vehicles entering and exiting Malaysia via the Johor-Singapore Causeway (the Causeway) will be funnelled through the EDL.
This ready source of traffic flow ' last recorded at 82,628 vehicles per day in September 2008 ' negates, to a large extent, concerns over the potential volatility of actual traffic volume once tolling begins.
In spite of the encouraging traffic flow along the Causeway, RAM Ratings has opted to maintain an average daily tollable traffic volume forecast of roughly 62,000 vehicles in 2012, based on the recent announcement of a 30% reduction in toll rates for the Malaysia-Singapore Second Crossing and potential competition from a proposed rail link with Singapore.
At the same time, the ratings are also supported by MRCB Southern Link's projected debt-servicing ability, well-structured debt-repayment profile and relatively tight financing covenants.
On the other hand, the greenfield nature of the Project remains a risk factor. As at 25 December 2009, the Project was 19.32%-completed under the revised work plan. Land acquisition has been completed and is likely to be within budget, although squatter families are preventing access to certain parcels of land.
While we understand that the Concessionaire fully intends to take the necessary steps to ensure that this does not jeopardise the timely completion of the Project, we will continue monitoring the relevant developments on this front. At present, the EDL remains on track towards commencing toll collection on 1 July 2012, as per RAM Ratings' expectations.
Below is the report issued by RAM Ratings on Thursday, July 1.
MRCB Southern Link is wholly owned by MRCB Lingkaran Selatan Sdn Bhd (MRCB Lingkaran Selatan or the Concessionaire) - the concessionaire for the proposed Eastern Dispersal Link Expressway (EDL or the Project) in Johor Bahru.
The Company has raised funds via the Sukuk and a syndicated transferable term loan of up to RM220 million for the development of the toll-road project, with financial commitments on these instruments to be supported by back-to-back payments from the Concessionaire once tolling operations start.
Meanwhile, the security package ensures that the sukuk holders have full and direct recourse to the Concessionaire. In this regard, RAM Ratings duly recognises the strong credit link between MRCB Southern Link and MRCB Lingkaran Selatan; as such, we view both companies in tandem from a credit standpoint.
Meanwhile, the Project has a unique tolling concept, where all vehicles entering and exiting Malaysia via the Johor-Singapore Causeway (the Causeway) will be funnelled through the EDL.
This ready source of traffic flow ' last recorded at 82,628 vehicles per day in September 2008 ' negates, to a large extent, concerns over the potential volatility of actual traffic volume once tolling begins.
In spite of the encouraging traffic flow along the Causeway, RAM Ratings has opted to maintain an average daily tollable traffic volume forecast of roughly 62,000 vehicles in 2012, based on the recent announcement of a 30% reduction in toll rates for the Malaysia-Singapore Second Crossing and potential competition from a proposed rail link with Singapore.
At the same time, the ratings are also supported by MRCB Southern Link's projected debt-servicing ability, well-structured debt-repayment profile and relatively tight financing covenants.
On the other hand, the greenfield nature of the Project remains a risk factor. As at 25 December 2009, the Project was 19.32%-completed under the revised work plan. Land acquisition has been completed and is likely to be within budget, although squatter families are preventing access to certain parcels of land.
While we understand that the Concessionaire fully intends to take the necessary steps to ensure that this does not jeopardise the timely completion of the Project, we will continue monitoring the relevant developments on this front. At present, the EDL remains on track towards commencing toll collection on 1 July 2012, as per RAM Ratings' expectations.
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