Malaysia International Islamic Financial Centre (MIFC) : RAM Ratings maintains negative outlook on Jati Cakerawala’s AA3 sukuk rating

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Press Release

04 Jan | Thursday

RAM Ratings maintains negative outlook on Jati Cakerawala’s AA3 sukuk rating

RAM Ratings has reaffirmed the AA3/negative rating of Jati Cakerawala Sdn Bhd’s (Jati or the Company) RM540 million Sukuk Murabahah (2013/2023). The negative outlook reflects our concerns over Jati’s intention to maintain hefty dividend payments over the remaining tenure of the Sukuk (2018-2023). Subject to meeting its distribution covenants annually, maximised dividend distributions would result in a breach of the 1.50-time subordinated finance service ratio (Sub-FSCR) (with cash balances, post distribution) threshold for an AA3-rated transaction upon repayment of the sukuk principal in July 2019 and cause the ratio to deteriorate to a minimum of 1.41 times over the remaining tenure of the sukuk under our sensitivity analysis.

Meanwhile, the rating reaffirmation is premised on Jati’s still strong projected Sub-FSCR (with cash balances, post distribution) in the near term. As at 31 July 2017, the ratio stood at 1.53 times against our previous expectation of 1.48 times. Purely an investment-holding company, Jati’s sole source of cashflow is dividend income from Tenaga Perlis Consortium Sdn Bhd (TTPC) (issue rating: AA1/Stable), an independent power producer that owns and operates a 650-MW combined-cycle, gas-turbine power plant in Perlis (the Plant). TTPC has continued to outperform our expectations despite operational setbacks in FY 2017, which had subsequently led to improvements in Jati’s cashflow performance.

Analytical contact
Serene Tan
(603) 7628 1088
serene@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my

Date of release: 4 January 2018

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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