RAM Ratings assigns AAA and AA2 ratings to MAHB’s senior and perpetual subordinated sukuk

Published on 08 Nov 2021.

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RAM Ratings has assigned respective ratings of AAA/Stable and AA2/Stable to Malaysia Airports Holdings Berhad’s (MAHB or the Group) proposed Senior Sukuk and Perpetual Subordinated Sukuk. These facilities are subject to a combined limit of RM5 bil under the Group’s proposed RM5 bil Senior Sukuk/Perpetual Subordinated Sukuk Programme. 

The rating of the Senior Sukuk issued under the programme reflects the Group's credit profile; the instrument ranks pari passu with MAHB’s other senior unsecured borrowings. Meanwhile, the Perpetual Subordinated Sukuk issued under the programme is rated two notches below MAHB’s long-term corporate credit rating, to reflect the risk of deferrable profit distributions and its deeply subordinated rights of the sukuk holders to claims in the event of insolvency.

We have concurrently reaffirmed MAHB’s existing ratings (Table 1), notwithstanding its weaker standalone credit profile. This reflects our assessment of a high likelihood of extraordinary support from the government, backed by the Group’s critical role as the operator of Malaysia’s international and domestic airports. MAHB’s performances in FY Dec 2020 and 1H FY Dec 2021 were weaker than expected, mainly due to the resurgence of COVID-19 infections in Malaysia. We expect the effects of the pandemic to continue to weigh on the Group, before its performance rebounds in FY Dec 2023. 

MAHB is the sole operator of all 39 government-owned airports in Malaysia. This underpins its solid business profile, which remains a rating strength. Sabiha Gokcen International Airport (SGIA, the second-largest airport in Turkey), which MAHB operates, fared relatively well during the pandemic, giving the Group some degree of diversification. The still-favourable long-term prospects of the airport industry and MAHB’s track record of prudent financial management also support the ratings.

The finalisation of MAHB’s new operating agreements, initially targeted to be signed by end-2020, has been pushed back further. The Malaysian Aviation Commission is currently reviewing proposed changes to the Group’s tariff structure. We understand that the exercise, which is expected to be concluded in mid-2022, may see the restructuring of some key terms of the agreements to ensure MAHB is financially viable over the longer term. While the delay in executing the new agreements is negative, MAHB’s rights and benefits under existing operating agreements remain intact.

Since 4Q 2020, MAHB’s domestic operations have repeatedly been hit by new waves of the coronavirus and ensuing rounds of travel restrictions. In 8M 2021, its domestic passenger traffic stood at just 8% of 2019 levels. International traffic remains negligible as borders are still effectively closed. We expect the loss from operations in Malaysia to widen to close to RM700 mil this year (operating loss in FY Dec 2020: RM489 mil). 

Following the recent lifting of interstate travel restrictions in Malaysia, we expect domestic air travel to pick up in the coming months, before accelerating to an average of 70% of pre-crisis levels in 2022. By comparison, international passenger traffic is likely to stay relatively weak in 2022, projected to be around 25% of 2019 levels. Globally, international air travel has seen a slow start. Activities have picked up of late, however, as countries gradually move away from zero-COVID tolerance strategies and harsh travel restrictions. 

MAHB’s operations in Turkey have bounced back faster. SGIA’s domestic passenger traffic exceeded pre-pandemic levels in August 2021. International passenger volumes reached 75% of 2019’s base in the same month, backed by further relaxation of entry requirements since July 2021. We expect MAHB’s funds from operations debt coverage (FFODC) to be marginally positive at least until FY Dec 2022. Somewhat normalised international passenger traffic in Malaysia and the full recovery of SGIA should lift FFODC to around 0.25 times in FY Dec 2023. 

We believe MAHB will continue to manage its capital structure and liquidity prudently. Gearing is projected to inch up to 0.80 times by year end but improve to around 0.7 times as at end-December 2023. As at end-June 2021, the Group held RM1.4 bil of cash balances and RM1.3 bil of unused credit lines, which afford a still comfortable cover against RM0.2 bil in short-term debt as well as near-term working capital and capex requirements. The management intends to refinance RM1.5 bil of sukuk maturing in December 2022 with issuances from the proposed new sukuk programme.

Table 1: MAHB’s ratings


Rating action

 Malaysia Airports Holdings Berhad


 Proposed RM5 bil Senior Sukuk/Perpetual Subordinated Sukuk Programme

  • Proposed RM5 bil Senior Sukuk



  • Proposed RM5 bil Perpetual Subordinated Sukuk




RM2.5 bil Senior Sukuk Programme (2013/2033)



RM2.5 bil Perpetual Subordinated Sukuk Programme (2014/2114)



 Malaysia Airports Capital Berhad


 RM3.1 bil Islamic Medium Term Notes Programme (2010/2025)



(1)  The rating of MAHB’s RM2.5 bil Senior Sukuk Programme reflects the Group’s credit profile; the instrument ranks pari passu with its senior unsecured borrowings.
(2)  MAHB’s RM2.5 bil Perpetual Subordinated Sukuk Programme is rated two notches below its long-term corporate credit rating to reflect the risk of deferrable profit distributions and the deeply subordinated
rights of the sukukholders to claims in the event of insolvency.
(3)  The rating of MAHB’s RM3.1 bil Islamic MTN Programme (under Malaysia Airports Capital Berhad) is linked to the Group’s senior rating as the Islamic structure of the facility provides recourse to MAHB by
virtue of its obligations under a purchase undertaking.


Analytical contacts
Amy Lo 
(603) 3385 2509

Thong Mun Wai 
(603) 3385 2522


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
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