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Press Release
23 Jan | Tuesday
RAM Ratings reaffirms rating of LEKAS’s sukuk

RAM Ratings has reaffirmed the C2/Stable rating of Lebuhraya Kajang-Seremban Sdn Bhd’s (LEKAS or the Company) RM633 million Junior Sukuk Istisna’ (Junior Sukuk) (2007/2025). The rating takes into consideration the low likelihood of repayment of the Junior Sukuk as well as its deeply subordinated position to the Company’s other debt obligations, i.e., its Redeemable Convertible Secured Islamic Debt Securities (RCSIDS) and Syndicated Term Loan (STL). Following LEKAS’s debt restructuring exercise in October 2013, repayments under its Junior Sukuk are not permissible until the STL and RCSIDS have been fully repaid. LEKAS holds the concession for the 44-km Kajang-Seremban Highway (LEKAS Highway or the Highway) until May 2039.

Following a 20% toll-rate hike in October 2015 – coupled with other factors such as the availability of alternatives including the toll-free Federal Road 1 and the North-South Expressway – the Company had seen its revenue contract by 3.85% for 2 consecutive years, largely owing to a 21.39% decline in the LEKAS Highway’s long-haul traffic. Although this was partially offset by strong growth in short-haul traffic of 42.09% due to the higher occupancy of housing developments along the Highway’s alignment, the drop in both long-haul traffic and revenue was greater than expected. As LEKAS Highway is a closed-toll expressway, where toll charges are dependent on the distance travelled, fewer long-distance commuters accordingly led to a larger reduction in revenue and earnings. Given the mismatch between LEKAS’s annual cash-generating capacity and the lumpy one-off repayment of the RCSIDS in April 2023, we continue to expect the Company to refinance its RCSIDS upon maturity.

As with most concession-related projects, the Company is exposed to regulatory and single-project risks.

Ong Ju Laine
(603) 7628 1183
julaine@ram.com.my

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

Date of release: 23 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

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 2018 by RAM Rating Services Berhad’s

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