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RAM Ratings reaffirms A1/Stable rating of Jati Cakerawala’s sukuk

Published on 10 Sep 2020.

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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.

 

Analytical contact
Irfan Afifah Mohd Zaki
(603) 3385 2551
irfan@ram.com.my

Media contact
Padthma Subbiah
(603) 3385 2577
padthma@ram.com.my

 

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



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