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RAM Ratings affirms Besraya’s sukuk rating
Published on 09 Nov 2023.
RAM Ratings has affirmed the AA2/Stable rating of Besraya (M) Sdn Bhd’s (Besraya or the Company) RM700 million Sukuk Mudharabah Issuance Facility (2011/2028).
The Company’s debt servicing ability is expected to remain robust, safeguarded by the steady traffic and cashflow profile of the Sungai Besi Highway and Besraya Eastern Extension (collectively, the Highway), the transaction’s structure and restrictive covenants. This is despite reduced earnings after a toll rate reduction and concession restructuring with no further compensation receipts. Moving forward, we expect Besraya to register minimum and average finance service coverage ratios (FSCRs) with cash balances (post-distribution) of 2.0 times and 2.43 times, respectively, throughout the Sukuk’s tenure (management’s base case: 2.0 times and 2.28 times).
While Besraya may opt to make distributions to shareholders if it meets post-distribution FSCRs of at least 2 times, the Company should be mindful of its longer-term cashflow profile and debt coverage measures in determining distributions. Given lower earnings and cash flow subsequent to the inking of a supplemental concession agreement on 30 December 2022, the transaction’s liquidity buffers are thinner and unable to absorb any further distributions without compromising future FSCRs under RAM’s sensitised cashflow projection.
The Highway’s average daily traffic clocked in at 164,980 vehicles in FY Mar 2023, dipping slightly to 162,626 in 5M FY Mar 2024 owing to traffic management on surrounding roads, which is viewed as temporary. On the back of steady cashflow generation, the Company’s FSCR on the latest sukuk payment date of 28 July 2023 rebounded to 2.02 times (above the 2.0 times minimum required for the AA2 rating) after having weakened during the pandemic.
Like other toll road concessionaires, Besraya is inherently exposed to regulatory and single-project risks. Potential termination or expropriation of its concession for the Highway is an event risk. In such a circumstance, the government will be obligated to compensate the Company in accordance with provisions of the concession agreement.
Analytical contacts
Wong Ee Loo
(603) 3385 2521
eeloo@ram.com.my
Davinder Kaur Gill
(603) 3385 2525
davinder@ram.com.my
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.
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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
