Published on 23 Apr 2020.
TRIplc Medical Sdn Bhd (TRIplc Medical or the Company) has been tasked with the construction - including medical equipment supply and installation - plus asset management of a teaching hospital and academic complex at Universiti Teknologi MARA’s (UiTM) campus in Puncak Alam, Selangor (the Project). Its 25-year Concession Agreement (CA) inked on 18 February 2016 with UiTM and the Government of Malaysia (GoM, through the Ministry of Higher Education) includes a 36-month construction period. The Project’s construction cost is partially funded by TRIplc Medical’s RM639 mil Senior Sukuk Murabahah (2017/2035), rated AA1/stable by RAM.
The Senior Sukuk’s rating is anchored by a four-year Al-Kafalah Facility of up to RM639 mil, including one profit payment, expiring on 22 October 2021 procured during the Project’s construction phase; this protects the Senior Sukuk holders against any delay and non-completion risk. The guarantee is provided by Danajamin Nasional Berhad and Bank Pembangunan Malaysia Berhad - both rated AAA/Stable/P1 by RAM - on a proportionate basis of RM319.5 mil each. It enhances the credit profile of the Senior Sukuk beyond its stand-alone credit strength during the construction phase. Upon the completion of the Project and the expiry of the Al-Kafalah Facility, the rating is anticipated to be supported by strong and timely cashflow, backed by TRIplc Medical’s CA with the GoM.
On 10 April 2020, the Project missed the 36-month completion milestone under its CA. While the Company had requested an Extension of Time (EoT) from UiTM and the GoM in late 2019 (as permitted under the CA if delays occurs owing to non-timely public authorities’ approval), no extension has been obtained to date. The EoT approval process has been partly held up by the present nationwide movement control order (MCO). Contractually, UiTM and the GoM can grant TRIplc Medical a six-month extension to rectify any failure or send the Company a default notice requiring a remedy within a specific period. Based on our interaction with TRIplc Medical, no extension or default notice has been issued by UiTM or the GoM to date.
Under the terms of the Sukuk Trust Deed, failure to complete the Project within the stipulated time as per the CA (without any EOT) is tantamount to an event of default (EoD). We understand that the sukukholders have yet to formally declare an EoD or issue a claim against the Kafalah providers. As of early March 2020, the Project was 94.55% completed. The targeted completion date is in October 2020 (in line with the Company’s requested six-month EoT application). Given the ongoing nationwide MCO since 18 March 2020, this is expected to be further delayed.
We are currently undertaking an annual rating review of the Senior Sukuk and expect to finalise our assessment in the next month.
Davinder Kaur Gill
(603) 3385 2525
(603) 3385 2577
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Ratings on TRIplc Medical Sdn Bhd