KUALA LUMPUR: RAM Ratings has placed the AA3 rating of Berjaya Infrastructure Sdn Bhd's (BISB) RM400 million Medium-Term Notes Programme (2008/2028) (MTN Programme) on Rating Watch, with a negative outlook.
BISB is an investment-holding company with subsidiaries that are involved in the operation, maintenance and management of water-treatment plants (WTPs) as well as the supply of treated water in Malaysia, Indonesia and China.
In a statement on Friday, Oct 8, the rating agency said the Rating Watch was premised on the poor collections of Air Utara Indah Sdn Bhd (AUI), ie BISB's main revenue contributor (FY Dec 2009: 59%).
AUI is the operation and maintenance service provider for WTPs in Kedah.
"We highlight that AUI's receivables cycle has lengthened since end-December 2009 from 7.5 months to the current level of 9 months.
"Following the establishment of Syarikat Air Darul Aman (SADA) to assume Jabatan Bekalan Air Kedah (JBAK)'s role, we understand from BISB's management that payments from January 2010 onwards are handled by SADA while outstanding payments prior to 2010 remain the responsibility of JBAK," it said.
However, administrative issues within SADA have resulted in non-payment for the 2010 invoices to AUI to date, it said.
As a result, AUI's outstanding receivables has ballooned to approximately RM40.86 million as at end-September 2010, it said.
RAM Ratings said the delayed payments would lead to liquidity stress for BISB if AUI's collections do not improve significantly by 4Q 2010.
Furthermore, BISB's liquidity risk will be heightened further if it embarks on any expansion plan to augment its overseas operations, thus potentially affecting its ability to comply with the RM11 million minimum balance requirement vis-''-vis its Debt Service Reserve Account by April 2011, it said.
"RAM Ratings will maintain close monitoring of the relevant developments including BISB's expansion plans, and make the necessary announcement within the next 2 months upon obtaining clarification from SADA.
"RAM Ratings' Rating Watch highlights a possible change in an issuer's existing debt rating. It focuses on identifiable events such as mergers, acquisitions, regulatory changes and operational developments that place a rated debt under special surveillance by RAM Ratings. In a broader sense, it covers any event that may result in changes in the risk factors relating to the repayment of principal and interest," it said.
BISB is an investment-holding company with subsidiaries that are involved in the operation, maintenance and management of water-treatment plants (WTPs) as well as the supply of treated water in Malaysia, Indonesia and China.
In a statement on Friday, Oct 8, the rating agency said the Rating Watch was premised on the poor collections of Air Utara Indah Sdn Bhd (AUI), ie BISB's main revenue contributor (FY Dec 2009: 59%).
AUI is the operation and maintenance service provider for WTPs in Kedah.
"We highlight that AUI's receivables cycle has lengthened since end-December 2009 from 7.5 months to the current level of 9 months.
"Following the establishment of Syarikat Air Darul Aman (SADA) to assume Jabatan Bekalan Air Kedah (JBAK)'s role, we understand from BISB's management that payments from January 2010 onwards are handled by SADA while outstanding payments prior to 2010 remain the responsibility of JBAK," it said.
However, administrative issues within SADA have resulted in non-payment for the 2010 invoices to AUI to date, it said.
As a result, AUI's outstanding receivables has ballooned to approximately RM40.86 million as at end-September 2010, it said.
RAM Ratings said the delayed payments would lead to liquidity stress for BISB if AUI's collections do not improve significantly by 4Q 2010.
Furthermore, BISB's liquidity risk will be heightened further if it embarks on any expansion plan to augment its overseas operations, thus potentially affecting its ability to comply with the RM11 million minimum balance requirement vis-''-vis its Debt Service Reserve Account by April 2011, it said.
"RAM Ratings will maintain close monitoring of the relevant developments including BISB's expansion plans, and make the necessary announcement within the next 2 months upon obtaining clarification from SADA.
"RAM Ratings' Rating Watch highlights a possible change in an issuer's existing debt rating. It focuses on identifiable events such as mergers, acquisitions, regulatory changes and operational developments that place a rated debt under special surveillance by RAM Ratings. In a broader sense, it covers any event that may result in changes in the risk factors relating to the repayment of principal and interest," it said.
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