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RAM Ratings affirms Widad Concession’s sukuk at AA1
Published on 27 Nov 2024.
RAM Ratings has affirmed the AA1/Stable rating of Widad Concession Sdn Bhd’s (WCSB or the Company) RM310 mil Sukuk Wakalah Facility (2022/2034) (the sukuk). The affirmation is anchored on the stable, predictable and prompt concession-backed cash flow from its sister company, YBK Usahasama Sdn Bhd (YBKU), through Universiti Teknologi MARA (UiTM), as well as covenants and restrictions imposed under the sukuk.
Wholly owned by Widad Group Berhad (WGB), Widad Concession was set up to acquire a public-private partnership or project finance initiative project concession held by YBKU. YBKU holds a 23-year concession to develop and maintain the Universiti Teknologi MARA (UiTM) campus in Jasin, Melaka. Without its own business operations, Widad Concession relies entirely on YBKU’s cash flow to service the sukuk through profit and principal repayment on murabahah stocks and dividends.
YBKU maintained a commendable maintenance track record during the review year, with negligible penalties incurred. Under RAM’s stressed analysis, WCSB’s consolidated finance service coverage ratios are projected to remain above the threshold for an AA1-rated low-complexity private finance initiative or public-private partnership transaction.
The transaction terms impose strict restrictions on all business activities, indebtedness, distributions to shareholders, and expenses. While no breaches were incurred across 2023 and 1H2024, additional tax payments totaling RM11.3 mil were imposed on YBKU during this period. As these amounts exceeded the transaction’s spending limits, approval was obtained from the sukukholders for its settlement using YBKU’s cash reserves.
Moderating the rating is the complex transaction structure involving multiple related parties and the remote risk of the concession’s termination. Should termination occur, the Government of Malaysia has no direct obligation to WCSB’s sukukholders. The sukukholders’ benefit from financial relief via a corporate guarantee and cash deficiency undertaking from WGB under any adverse circumstances, however such support is precluded from our rating assessment.
Analytical contacts
Julian Chan
(603) 3385 2486
julian@ram.com.my
Davinder Kaur Gill
(603) 3385 2525
davinder@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@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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Published by RAM Rating Services Berhad
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