Published on 07 Feb 2019.
RAM Ratings has assigned an AAA(fg)/stable rating to TRIplc Ventures Sdn Bhd’s (TVSB or the Company) MTN Programme of up to RM240 mil in nominal value (2011/2026). The rating reflects the irrevocable and unconditional financial guarantee insurance (FGI) policy provided by Danajamin Nasional Berhad (Danajamin, rated AAA/stable/P1).
TVSB is the concessionaire for the development and maintenance of Zone 1 Phase 2 of the Universiti Teknologi MARA (UiTM) campus in Puncak Alam, Selangor (the Project). This is premised on a 23-year tripartite Concession Agreement (CA) between the Government of Malaysia (GoM) – as represented by the Ministry of Higher Education (now known as the Ministry of Education or MOE) – UiTM and TVSB.
Following the successful delivery of the Project, TVSB is entitled to receive fixed monthly Availability Charges for 20 years, effective 11 April 2014. In return for maintaining the campus, it will also receive monthly Maintenance Charges. Under the CA, the GoM may review the scope and rates upon the conclusion of the first five-year period on 10 April 2019. To date, UiTM has not indicated any intention of revising the scope or rates. Similarly, TVSB can also request a review of the rates. We note that TVSB has written to UiTM to request for higher Maintenance Charges.
Since the commencement of the maintenance period, TVSB’s track record has been commendable. The Company has managed to maintain its KPI levels well above what is stipulated under the CA. Failure to meet KPIs will result in the imposition of demerit value penalties and the deduction of the requisite amount from the Maintenance Charges. To date, the cumulative deductions from the Maintenance Charges have been negligible.
TVSB’s debt-servicing ability is considered strong, with Availability Charges being the only source of repayment for the MTN as we have assumed negative maintenance margins through the remaining concession period. After meeting maintenance expenses and administrative costs, the Company is expected to generate RM31 mil-RM39 mil of annual pre-financing cashflow. This translates into respective stressed minimum and average debt service cover ratios (DSCRs) of 1.52 and 1.74 times (with cash, calculated over a 12-month period in profit/principal payment months). Other strengths of TVSB’s debt issue include a low degree of counterparty risk and its tight transaction structure as well as restrictive covenants.
Despite minimal counterparty risk, timely payments are crucial. Any material delay in the disbursement of concession payments, which could occur due to administrative hurdles, will affect the transaction’s cashflow and liquidity. Nonetheless, we derive some comfort from UiTM’s good payment track record since the commencement of maintenance services. Availability and Maintenance Charges have been typically received within one month, with a few instances of having been stretched to two months.
Certain events can lead to the termination of the Concession. This will disrupt the concession payments and, in turn, jeopardise TVSB’s ability to meet its obligations. Given the low-to-moderate complexity of the maintenance services and the commendable track record, termination risk is deemed low. More importantly, the MTN holders will be protected by the financial guarantee facility from Danajamin in the event of termination.
Thong Mun Wai
(603) 7628 1022
(603) 7628 1162
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Ratings on TRIplc Ventures Sdn Bhd