RAM Ratings reaffirms AA1 rating of Indera Persada’s bonds

Published on 07 Jan 2020.

Share Tweet Email

RAM Ratings has reaffirmed the AA1/Stable rating of Indera Persada Sdn Bhd’s (the Company) RM280 mil Fixed Rate Serial Bonds (2013/2028) (the Bonds). The reaffirmation is premised on the receipt of stable and adequate concession payments to service the Company’s financial obligations under the Bonds. Based on a steady inflow of Availability Charges (ACs), the Company’s debt service cover ratio (DSCR) is expected to come up to at least 1.51 times (with cash balances, post-distribution on payment months) throughout the tenure of the Bonds. This is despite RAM’s stress-test assumptions of delays in monthly and lump-sum payments from the Public Works Department (PWD). 

Indera Persada is a single-purpose company set up to undertake the development of and provide asset-management services to the Centre of Excellence in Engineering and Technology (CREaTE) in Malacca, under an 18-year Concession Agreement (CA) with the Government of Malaysia (GoM) dated 18 March 2013. In return for the construction of CREaTE, the Company will be entitled to receive a highly predictable stream of monthly Availability Charges (ACs) and Maintenance Service Charges (MSCs) from the PWD, commencing September 2016 for the next 15 years. 

We have assumed that MSCs will be fully utilised to support operational expenses while ACs will be the sole source of repayment for the Bonds. The level of counterparty risk faced by Indera Persada is deemed low as the ultimate obligor of monthly concession payments is the GoM via the PWD. Notably, the rating is moderated by the risk of delays in the receipt of monthly ACs. In 2019, payments of ACs by the PWD have mostly been prompt, i.e. within 30-45 days from the date of invoice. On the other hand, payment of MSCs has ranged around 60-90 days due to administrative issues. 

To date, Indera Persada has been incurring RM0.64 mil of fixed deductions per year since 2017. This translates into some 13.5% of full eligible MSCs, which is higher than those of other RAM-rated Private-Finance-Initiative concessions. According to the management, the deductions have been mainly due disagreement between PWD and Indera Persada over the quality of the Company’s maintenance services. These issues have been escalated to the PWD’s Dispute Resolution Committee and are pending resolution. In the meantime, the likelihood of termination of the CA due to non-performance by Indera Persada is deemed low as the current level of deductions is well below the trigger of 25% of MSCs for three consecutive months required for CA termination. 

During the period under review, Indera Persada distributed a total of RM8 mil to its sole parent, Digistar Holdings Sdn Bhd as partial repayment of project construction costs. While the financing terms are silent on the repayment of advances owed to related companies, we understand that the Company had still complied with its distribution covenants even after accounting for the repayment – as verified by the Trustee and the Facility Agent. Although the Company’s debt-servicing ability is anticipated to remain healthy, we highlight that any distribution on a forward-looking basis needs to be curtailed to avoid exerting downward pressure on the rating.


Analytical contact
Teoh Tze Yit
(603) 3385 2577

Media contact
Padthma Subbiah
(603) 3385 2577


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2020 by RAM Rating Services Berhad

Rating Rationale

Ratings on Indera Persada Sdn Bhd