RAM Ratings assigns AA1 preliminary rating to Indera Persada’s proposed MTN, affirms existing issue rating

Published on 09 Aug 2023.

Share Tweet Email

RAM Ratings has assigned a AA1/Stable preliminary rating to Indera Persada Sdn Bhd’s (the Company) proposed RM68 mil Medium-Term Notes (MTN) Programme. The Company’s RM280 mil Fixed Rate Serial Bonds (2013/2028) (the Senior Bonds) rating of AA1/Stable was affirmed on 27 June 2023. 

The underlying cashflow servicing the proposed MTNs and the Senior Bonds solely derives from Indera Persada’s consistent and timely concession payments (Availability Charges) (ACs) from the Public Works Department following the completion of the department’s Centre of Excellence in Engineering and Technology in Malacca and amid its ongoing maintenance. Accordingly, our analysis focuses on the transaction’s project economics in addition to restrictions, limitations and covenants under the transaction. 

The rating reflects the Company’s strong debt servicing ability, supported by projected debt service coverage ratios (DSCRs) of above 1.50 times, commensurate with the rating assigned. That said, our sensitised scenario analysis indicates that Indera Persada will be reliant on brought-forward cash to meet the requisite DSCRs, particularly in later years. As such, it is vital that distributions to shareholders and/or subordinated bonds take this aspect into consideration to preserve future debt coverages.  

Indera Persada’s overall debt obligations will increase subsequent to the proposed MTN issuance, the proceeds of which will be used to partially pare down the Senior Bonds and pay shareholders, with the remainder serving as liquidity support for the transaction. Although the Company’s overall debt repayment tenure extends through the remaining life of its concession (up to August 2031), principal repayment of the proposed MTNs will commence only after full redemption of the Senior Bonds by September 2028. Both the proposed MTNs and the Senior Bonds rank pari passu.

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. To ensure an alignment of interests and provide MTN holders recourse in adverse circumstances, the security package includes a corporate guarantee from Digistar. The guarantee may offer MTN holders some financial relief but its effectiveness could be constrained by Digistar’s financial health. 

The risk of non-performance at Indera Persada remains remote, with monthly maintenance service charge deductions at a low of 3% in 6M 2023 (2022: 2% on average). From a cashflow perspective, the interests of bondholders and MTN holders 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, bondholders and MTN holders may be entitled to some compensation should termination occur. The corporate guarantee improves recovery prospects. 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.


Analytical contacts
Zachary Tan
(603) 3385 2612

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

Rating Rationale

Ratings on Indera Persada Sdn Bhd