Aug 05 2010
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RAM Ratings assigns preliminary AAA/P1 ratings to Malaysia Airports Capital's proposed up to RM3.10 billion sukuk
MACB is a special-purpose vehicle set up as a wholly owned subsidiary of Malaysia Airports Holdings Berhad (MAHB or the Group), to undertake the issuance of the Proposed Sukuk for the latter. MACB's income will be solely derived from the Ijarah rental payable by MAHB, which will be used to service the Issuer's debt obligations. Under the Ijarah structure, the sukuk holders' recourse to MAHB is recognised via a Purchase Undertaking between the Issuer and MAHB. Pursuant to the Purchase Undertaking, MAHB will buy the trust assets from the Issuer upon the occurrence of certain events, at a price equal to the exercise price. In this regard, we recognise the strong credit link between MACB and MAHB, and thus view both companies in aggregate from a credit perspective. Given this, the ratings are therefore a reflection of MAHB's credit risk.
MAHB is the exclusive 25-year concession holder that operates, manages and maintains Kuala Lumpur International Airport (KLIA). The Group also holds a separate 25-year concession to operate, manage and maintain all other Malaysian airports and short-take-off and landing ports (STOLS) (collectively referred to as "the Designated Airports"), with the exception of Senai International Airport in Johor. The ratings reflect MAHB's strong business profile; the Group's virtual monopoly position has enabled its strong margin on operating profit before depreciation, interest and tax of around 30% for the past 5 years. Despite the global slowdown, the Group's passenger traffic reached 51.34 million in 2009 - an 8.2% y-o-y increase that is largely attributable to the significant growth of the low-cost-carrier segment. Moving forward, the Group's financial profile is expected to stay robust even after taking into consideration the drawdown of borrowings to finance its capital expenditure (capex); its adjusted gearing ratio is expected to hover at around 0.7-0.8 times (end-December 2009: 0.27 times), with a corresponding adjusted funds from operations debt coverage ratio of about 0.24 times over the next 2 years (end-December 2009: 0.52 times).
On the other hand, the ratings are moderated by MAHB's hefty capex, which amounts to approximately RM3.5 billion over the next 3 years, which includes the funding for the construction of the new low-cost-carrier-terminal. The Group's operations are also susceptible to event risk given that air traffic is vulnerable to external events. In the meantime, MAHB must compete against other international airports within the Asia-Pacific region. Lastly, the Group's overseas ventures also entail political and regulatory risks.
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, transfer and convertibility risks, repatriation risk, currency risk or any other risk apart from credit risk.
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.
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