KUALA LUMPUR: RAM Rating Services Bhd has reaffirmed the ratings of Penang Bridge Sdn Bhd's (PBSB) debt notes totaling RM1.48 billion and the long-term ratings have a stable outlook.
RAM Ratings said on Thursday, Sept 23 that it has reaffirmed the AA2 ratings of PBSB's RM785 million Al-Bai' Bithaman Ajil facility (2000/2013) (BaIDS) and RM695 million redeemable zero-coupon serial Sukuk Istisna' (2006/2019) (Sukuk). The long-term ratings have a stable outlook.
UEM Group Bhd is the parent company of PBSB, which is the concessionaire of the 13.5-km Penang Bridge and is responsible for managing, operating, upgrading and collecting bridge toll under a 25-year concession that ends on May 31, 2018.
The ratings agency said given the bridge's status as the only road link between the mainland and the island of Penang, it has been consistently posting traffic-volume growth since its opening in 1985.
Despite the challenging economic environment in 2009, traffic flow on the bridge rose 2.5% year-on-year to 23.08 million passenger-car-units (PCU). The growth momentum continued into 2010, as evidenced by the Bridge's 11.7% on-year traffic-volume increase for the first seven months of the year.
It believed this was due to the low base in early 2009 and more upbeat economic sentiment; Malaysia's gross domestic product (GDP) expanded 8.9% on-year in 2Q 2010.
Second Penang Bridge
Based on the management's traffic projections, the opening of the Second Penang Bridge (Second Bridge) - expected by 4Q 2013 - is expected to reduce the bridge's traffic volume by about 16%.
However, RAM Ratings said it was difficult to gauge the exact impact at this juncture, as commuters' decision to use the competing route will depend on factors like traffic-dispersal systems, travelling distance, convenience and toll rates.
Nonetheless, RAM Ratings' cashflow analysis assumes a 20% reduction in the Bridge's traffic volume upon the completion of the Second Bridge, followed by a 1% growth thereafter.
It highlighted that a greater-than-expected traffic leakage will strain the company's cashflow.
Based on RAM Ratings' cashflow analysis, PBSB is expected to register respective minimum and average finance service cover ratios (FSCRs) (with all cash balances, post-distribution) of 2.26 times and 3.02 times throughout the tenures of the facilities (excluding the final year of the Sukuk repayment), underpinned by an average pre-financing cashflow of about RM127 million per annum.
Notably, the PBSB's FSCRs (without cash balances) will dip below 1.0 time from 2015 onwards due to the Sukuk's increasing repayments.
During that period, PBSB will have to partially rely on its cash reserves to meet its debt obligations.
'We therefore remain cautious about the company's future distributions to its shareholder, as sustained distributions ' while still adhering to the distribution covenant of 2.5 times ' may weaken its future FSCRs beyond its existing profile. We also note that the company has not declared or paid any dividend since fiscal 2001,' it said.
RAM Ratings said on Thursday, Sept 23 that it has reaffirmed the AA2 ratings of PBSB's RM785 million Al-Bai' Bithaman Ajil facility (2000/2013) (BaIDS) and RM695 million redeemable zero-coupon serial Sukuk Istisna' (2006/2019) (Sukuk). The long-term ratings have a stable outlook.
UEM Group Bhd is the parent company of PBSB, which is the concessionaire of the 13.5-km Penang Bridge and is responsible for managing, operating, upgrading and collecting bridge toll under a 25-year concession that ends on May 31, 2018.
The ratings agency said given the bridge's status as the only road link between the mainland and the island of Penang, it has been consistently posting traffic-volume growth since its opening in 1985.
Despite the challenging economic environment in 2009, traffic flow on the bridge rose 2.5% year-on-year to 23.08 million passenger-car-units (PCU). The growth momentum continued into 2010, as evidenced by the Bridge's 11.7% on-year traffic-volume increase for the first seven months of the year.
It believed this was due to the low base in early 2009 and more upbeat economic sentiment; Malaysia's gross domestic product (GDP) expanded 8.9% on-year in 2Q 2010.
Second Penang Bridge
Based on the management's traffic projections, the opening of the Second Penang Bridge (Second Bridge) - expected by 4Q 2013 - is expected to reduce the bridge's traffic volume by about 16%.
However, RAM Ratings said it was difficult to gauge the exact impact at this juncture, as commuters' decision to use the competing route will depend on factors like traffic-dispersal systems, travelling distance, convenience and toll rates.
Nonetheless, RAM Ratings' cashflow analysis assumes a 20% reduction in the Bridge's traffic volume upon the completion of the Second Bridge, followed by a 1% growth thereafter.
It highlighted that a greater-than-expected traffic leakage will strain the company's cashflow.
Based on RAM Ratings' cashflow analysis, PBSB is expected to register respective minimum and average finance service cover ratios (FSCRs) (with all cash balances, post-distribution) of 2.26 times and 3.02 times throughout the tenures of the facilities (excluding the final year of the Sukuk repayment), underpinned by an average pre-financing cashflow of about RM127 million per annum.
Notably, the PBSB's FSCRs (without cash balances) will dip below 1.0 time from 2015 onwards due to the Sukuk's increasing repayments.
During that period, PBSB will have to partially rely on its cash reserves to meet its debt obligations.
'We therefore remain cautious about the company's future distributions to its shareholder, as sustained distributions ' while still adhering to the distribution covenant of 2.5 times ' may weaken its future FSCRs beyond its existing profile. We also note that the company has not declared or paid any dividend since fiscal 2001,' it said.
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