Published on 20 Nov 2019.
RAM Ratings has reaffirmed the AA1/Stable rating of TRIplc Medical Sdn Bhd’s (TMSB or the Company) RM639 mil Senior Sukuk Murabahah (2017/2035). This reflects the irrevocable and unconditional Al-Kafalah facility jointly provided by Danajamin Nasional Berhad and Bank Pembangunan Malaysia Berhad – both rated AAA by RAM – to the holders of the Senior Sukuk. The Al-Kafalah facility spans the duration of the construction period for a teaching hospital and medical academic complex (the Project) for Universiti Teknologi MARA (UiTM), located on the latter’s campus in Puncak Alam, Selangor. As at 10 August 2019, construction was 71.70% completed (one day ahead of schedule), with no cost overrun.
The rating is also indicative of TMSB’s robust ability to service the Senior Sukuk after the construction of the Project. Post-completion, TMSB is entitled to receive fixed monthly Availability Charges and KPI-driven Asset Management Charges. After factoring in construction and concession payment delays, TMSB is projected to register respective minimum and average finance service coverage ratios (with cash balances, post-distribution, calculated on payment dates) of 1.65 and 1.99 times throughout the tenure of the Senior Sukuk.
The holders of the Senior Sukuk are protected in case of an Event of Default (EoD) during the Al-Kafalah covered period, which extends up to 48 months from the issuance of the Senior Sukuk or the receipt of the Certificate of Acceptance (COA), whichever is earlier. Performance-related EoDs include non-completion of the Project within the stipulated timeframe in the Concession Agreement (CA) and suspension of work beyond 180 days.
TMSB’s lack of experience in hospital maintenance is considered challenging given the complexity and level of service required. We, however, draw some comfort from the track record of TMSB’s sister company, TRIplc Ventures Sdn Bhd, in maintenance work – although less complex – under a separate concession within the same campus. Meanwhile, the medical equipment vendors will undertake the more technically challenging maintenance of medical equipment, for three years from the COA.
On 18 February 2016, TMSB entered into a 25-year CA with UiTM and the Government of Malaysia, to construct and undertake asset management services for the Project. Despite the low degree of counterparty risk, TMSB is susceptible to payment delays and CA termination risk, both of which would affect its ability to meet its sukuk obligations. If termination due to default by TMSB occurs during the construction period, the Senior Sukuk holders will be protected by the Al-Kafalah facility. After the completion of the Project, the outstanding Senior Sukuk will be repaid by UiTM.
Chu Jia Ying
(603) 3385 2519
(603) 3385 2577
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Ratings on TRIplc Medical Sdn Bhd