Published on 27 Jun 2023.
RAM Ratings has affirmed the AA1/Stable rating to Indera Persada Sdn Bhd’s (the Company) RM280 mil Fixed Rate Serial Bonds (2013/2028) (the Bonds).
The affirmation indicates that the Company’s debt servicing ability remains intact with the Company’s debt service coverage ratios (DSCRs) surpassing RAM’s projections and the minimum required to anchor the rating. This was supported by consistent and timely concession-based cash inflows (Availability Charges (ACs) from the Public Works Department), which are the sole source of bond repayments. The structural covenants of both debt issues further support the Company’s debt repayment capacity.
Throughout the Bonds’ tenure, Indera Persada’s projected DSCRs are expected to broadly meet the minimum DSCRs of 1.5 times required to support the Bonds rating and financial covenants. That said, we expect a temporary blip in DSCRs to 1.36 times in September 2023 under our stressed assumptions and on account of lower cash retention (after paying shareholders and subordinated lenders). In any case, there is a likelihood of avoiding the DSCR dip if monthly concession payments remain timely.
As observed in previous years, the Company continues to rely on advances from Digistar Corporation Berhad (Digistar), its ultimate parent company, to cover residual expenses not met by concession receipts. Despite the lack of a written commitment from Digistar, the risk of non-performance at Indera Persada is remote at this juncture, with monthly maintenance service charge deductions at a low of 2% in 2022 (2021: 8% on average). From a cashflow perspective, the interests of bondholders remain protected as monthly concession receipts via ACs are earmarked for debt repayment and cannot be used to meet operations and maintenance costs.
While concession termination is unlikely given the non-complex nature of maintenance and low counterparty risk posed by the government, Indera Persada and bondholders may be entitled to some compensation should termination occur. Like other concession-related companies, Indera Persada faces single-project risk and maintains insurance coverage to protect against disruptions caused by force majeure or major operational failures.
(603) 3385 2612
Davinder Kaur Gill
(603) 3385 2525
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Published by RAM Rating Services Berhad
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Ratings on Indera Persada Sdn Bhd