Published on 21 Oct 2022.
RAM Ratings has placed the AA3 rating of Besraya (M) Sdn Bhd’s (Besraya or the Company) RM700 million Sukuk Mudharabah Issuance Facility (2011/2028) on Rating Watch with a developing outlook.
The rating action follows the 13 October 2022 announcement by the Prime Minister on a toll rate reduction at the Sungai Besi Expressway and the Besraya Eastern Extension (collectively the Highway) effective 1 January 2023, the quantum of which has yet to be revealed. The developing outlook is premised on the lack of details of the revised contractual arrangement between Besraya and the Government of Malaysia at this juncture.
While Besraya’s prior debt coverage indicator with minimum finance service coverage ratios of 2.00 times means it is eligible for a rating upgrade based on RAM’s revised rating criteria for a matured highway, the latest developments may result in a possible change to the rating. Our cashflow simulation indicates that a tariff reduction of beyond 15% is a downside risk to the Company’s current rating.
We expect the Rating Watch to be resolved within the next three to six months. We will continue to monitor the developments closely and make the necessary updates, once further details are available.
Besraya is the concessionaire for the Highway and has been operational since 1999. Its diminished traffic volumes amid the pandemic rebounded strongly following the easing of mobility curbs in August 2021 and the transition to COVID-19 endemicity since April 2022. In 1H FY Mar 2023 (April-September 2022), the Highway’s average daily traffic surpassed the pre-pandemic level of 158,000 vehicles, coming in at 167,058 vehicles. Its performance was supported by stronger weekend traffic, as well as the Highway’s improved infrastructure and connectivity following the opening of Kuchai Link 2 and Ramp 5A. As a prudent measure, our analysis assumes future traffic will normalise to pre-pandemic levels as we view the traffic surge to be temporary. We will be observing its performance for longer to establish a stabilised post-pandemic pattern.
RAM’s Rating Watch highlights a possible change in an issuer’s debt rating. It focuses on identifiable events such as mergers, acquisitions, regulatory changes and operational developments that place a rated debt under RAM’s special surveillance. In a broader sense, the Rating Watch covers any event that may result in changes in risk factors relating to the repayment of principal and interest.
Issues are put on Rating Watch when some of the abovesaid events are expected to or have occurred. The Rating Watch, however, does not mean that the rating will inevitably be changed. It only means that RAM is evaluating the rating and a final affirmation is pending. A ”positive” outlook indicates that a rating may be raised while a "negative" outlook indicates a possible downgrade. A “developing” outlook refers to unusual situations in which future events are so unclear that the rating may potentially be raised or lowered.
Wong Ee Loo
(603) 3385 2521
Davinder Kaur Gill
(603) 3385 2525
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 2022 by RAM Rating Services Berhad
Ratings on Besraya (M) Sdn Bhd