Published on 10 Sep 2020.
RAM Ratings has reaffirmed the A1/Stable rating of Jati Cakerawala Sdn Bhd’s (Jati or the Company) RM540 mil Sukuk Murabahah (2013/2023). As a pure investment-holding company, Jati’s sole source of cashflow – dividend distributions from subsidiary Teknologi Tenaga Perlis Consortium Sdn Bhd (TTPC) – has remained robust, underscored by TTPC’s commendable operational metrics and cashflow-generating aptitude. This is underlined by the AA1/Stable rating of TTPC’s RM835 mil Sukuk Murabahah (2013/2023). TTPC is an independent power producer that owns and operates a 650 MW combined-cycle, gas-turbine power plant in Perlis.
The three-notch differential between the sukuk ratings of Jati and TTPC reflects the low level of subordination of the Company’s Sukuk and its adequate debt coverage throughout the issue’s remaining tenure. Jati relies solely on TTPC’s dividends to fulfil its own obligations. As such, the Company’s Sukuk is deemed structurally subordinated to TTPC’s sukuk in terms of cashflow priority and security. Based on its transaction structure and financing terms, Jati’s Sukuk is slightly subordinated to TTPC’s sukuk as the former’s debt-like features outweigh its equity-like features.
On 31 July 2020, Jati’s subordinated finance service coverage ratio stood at 1.54 times, i.e. higher than our earlier projection of 1.46 times. This was underscored by TTPC’s operational and financial outperformance, which had improved the Company’s cashflow. Premised on Jati’s intention of maximising dividend payments so long as its distribution covenant permits, we expect this ratio to hit a minimum of 1.42 times throughout the remaining tenure of the Sukuk – commensurate with an A1 rating.
Irfan Afifah Mohd Zaki
(603) 3385 2551
(603) 3385 2577
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Ratings on Jati Cakerawala Sdn Bhd