Friday, March 18, 2011

RAM Ratings says RM90m govt compensation to New Pantai Expressway restores cashflow profile

KUALA LUMPUR: RAM Rating Services Bhd says its concerns about potential revenue loss by New Pantai Expressway Sdn Bhd (NPESB) has been alleviated after the government recently announced a cash compensation of about RM90 million.

NPESB owns the concession rights to collect toll along the 19.6-km New Pantai Highway.

The ratings agency said NPESB's RM490 million senior Bai' Bithaman Ajil notes (2003/2014) and RM250 million junior Bai' Bithaman Ajil Notes (2003/2016) were rated AA3 and AA3(s), respectively.

It added the rating of the junior notes was enhanced by a corporate guarantee from NPESB's ultimate holding company, IJM CORPORATION BHD [], which unconditionally and irrevocably assured all payments on the junior notes while the senior notes remain outstanding.

The rating of the junior notes will be reassessed upon full redemption of the senior notes.

On Feb 17, the government announced a tariff reduction for the highway's PJS 2 toll plaza, from RM1.60 to RM1 (for Class 1 vehicles, effective Feb 18, 2011), without mentioning any accompanying compensation arrangement.

'Pursuant to the Government's latest announcement, the estimated RM90 million compensation will reinstate NPESB's cash-generating ability and also restores the debt-coverage levels of both its senior and junior notes. That said, we expect the cash to be retained by the company; any distribution to its shareholder would weaken the cash buffer for the junior notes' debt servicing,' it said.

RAM Ratings said despite the latest development, there is still uncertainty arising from the Government's recent calls for concessionaires to freeze, reduce or abolish their toll collections without any ensuing compensation.

'While RAM Ratings will maintain close monitoring of the situation and evaluate the developments on a case-by-case basis, we note that the most recent (and past) amendments to NPESB's concession terms have been equitable to all stakeholders,' it said.

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