RAM Ratings affirms Northern Gateway’s AA1/Stable issue rating

Published on 07 Aug 2023.

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RAM Ratings has affirmed the AA1/Stable rating of Northern Gateway Infrastructure Sdn Bhd’s (the Company) RM340 mil MTN Programme (2017/2034). The affirmation is premised on Northern Gateway’s strong debt servicing ability, thanks to the steady and timely inflow of concession-based cash flows that it is entitled to receive. In 2011, Northern Gateway was awarded the concession to build and maintain the customs and immigration complex in Bukit Kayu Hitam, Kedah (the Project). The complex was completed in two phases, the second on 19 August 2019. 

Following the execution of the delayed Phase 2’s lease and sub-lease agreements, Northern Gateway received RM16.25 mil in concession payments previously withheld by the Ministry of Home Affairs. As such, the Company’s debt service coverage ratio (DSCR) (with cash balances, post-distribution, calculated over a 12-month period in payment months) of 5.33 times for February 2023 was especially robust.

We expect minimum DSCRs of at least 1.50 times throughout the MTNs’ tenure, comfortably in line with the requirement for an AA1-rated transaction. Our analysis accounts for a RM20 mil dividend payment in fiscal 2023. The risk of transaction cashflow leakage is minimised by the MTNs’ tight covenants and structural features.

While the Project has been completed, final construction costs may be determined only after remaining payments to contractors are made. These will be covered by unutilised construction funding. Maintenance services for the complex, undertaken by Alam Flora Environmental Solutions Sdn Bhd, stayed commendable, as evidenced by minimal performance deductions incurred to date. 

Given the non-complex nature of maintenance and low counterparty risk posed by the government, concession termination is unlikely but may entitle Northern Gateway and bondholders to compensation should it occur. In such an instance, risk arises from delays in compensation payments.


Analytical contacts
Seri Nuralya Munawir
(603) 3385 2484

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 2023 by RAM Rating Services Berhad

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