23 November 2015

RAM Ratings has reaffirmed the AA3/Stable rating of Jati Cakerawala Sdn Bhd's (Jati or the Company) RM540 million Sukuk Murabahah (2013/2023). The rating reflects Jati's continued receipt of sturdy dividends from its 80%-owned subsidiary, Teknologi Tenaga Perlis Consortium Sdn Bhd (TTPC) - an independent power producer that owns and operates a 650-MW combined-cycle, gas-turbine power plant in Perlis. As Jati is a pure investment-holding company, it depends solely on dividends from TTPC to repay its Sukuk and thus is highly reliant on TTPC's operational metrics and cash-generating aptitude, which remained robust during the review period.

The rating of Jati's sukuk has been notched down from the AA1/Stable rating of TTPC's Sukuk, premised on the lower priority of Jati's sukuk in terms of both cashflow waterfall and security. The 2-notch rating differential reflects the low level of subordination of Jati's sukuk, as well as the Company's projected minimum subordinated finance service coverage ratio (with cash balances, post-distribution and calculated on periodic repayment dates) of 1.50 times throughout the Sukuk's tenure.

Our sensitivity analysis assumes that both TTPC and Jati will pay dividends to their respective shareholders while adhering to their covenants throughout the tenures of both sukuk (i.e., on a forward-looking basis, as opposed to only in the year of assessment). Nevertheless, we expect Jati to curtail future dividends to ensure ample cash retention, in view of TTPC's hefty planned capex for fiscal 2022, which would in turn affect Jati's cashflow coverage.

-Ends-

Media contact
Wang Wai Wah
(603) 7628 1110
waiwah@ram.com.my

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