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Press Release
15 Jan | Wednesday
RAM Ratings reaffirms AAA(bg) rating of EKVE’s sukuk

RAM Ratings has reaffirmed the AAA(bg)/Stable rating of EKVE Sdn Bhd’s (EKVESB or the Company) Guaranteed Sukuk Murabahah Facility of up to RM1,000 mil in Nominal Value (the Sukuk). The rating reflects the irrevocable and unconditional guarantees extended by AAA-rated Maybank Islamic Berhad and Bank Pembangunan Malaysia Berhad. Under a 50-year concession agreement (CA) with the Government of Malaysia (GoM), EKVESB is the concessionaire of the East Klang Valley Expressway (EKVE or the Project or the Expressway) – a 36.16-km closed-toll system from Sungai Long in Kajang to Ukay Perdana in Ampang.  
 
Following approval for the third construction work programme (CWP), the EKVE has been facing construction delays amid setbacks in obtaining approval for controlled rock blasting and limited accessibility due to hilly terrain. The Company, however, expects the Expressway to be completed by July 2020. Although the Project is envisaged to be completed within the RM1.55 bil budgeted cost, our sensitised cashflow projections have factored in a six-month delay with a 5% cost overrun. The Company’s sole shareholder, Ahmad Zaki Resources Berhad, has undertaken to cover all potential cost overruns to ensure that EKVESB meets its financial covenants, and to assist the Company to honour its obligations under the Sukuk.
 
Considering the construction- and traffic-related risks in our sensitivity analysis, EKVESB may need to refinance its financial obligations by 2021 in the absence of financial support from its shareholder. While the Expressway will complete the Kuala Lumpur Outer Ring Road network and improve connectivity for north-south traffic flows in the eastern part of the Klang Valley, its traffic volume will remain subdued amid high initial toll rates and competition from the Sungai Besi-Ulu Kelang Expressway (currently under construction) as well as the Sungai Buloh-Kajang MRT line.
 
As with most concession-related projects, the Company is exposed to regulatory and single-project risks.
 
 

Analytical contact
William Tan
(603) 3385 2530
williamtan@ram.com.my
 
Media contact
Padthma Subbiah
(603) 3385 2577
padthma@ram.com.my
 

Date of release: 14 January 2020

  
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 2020 by RAM Rating Services Berhad

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