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 considers the low likelihood of repayment of the Junior Sukuk as well as its subordination to the Redeemable Convertible Secured Islamic Debt Securities (RCSIDS) and the Syndicated Term Loan (STL). LEKAS holds the concession for the 44-km Kajang-Seremban Highway (KSH or the Highway), effective until May 2039.
Despite the better-than-expected traffic profile of the Highway and the newly opened LEKAS-Ecohill Link which is expected to improve traffic volume, especially at the Semenyih and Kajang Selatan toll plazas, we still expect the RCSIDS to be refinanced upon maturity due to the mismatch between LEKAS's annual cash-generating capacity and the lumpy one-off repayment of the RCSIDS in April 2023.
However, LEKAS is still expected to sufficiently cover annual repayments of the STL, based on RAM's sensitised analysis which indicates that the Company will generate an average annual pre-financing cashflow of RM75 million throughout the tenure of the Junior Sukuk. Average daily traffic (ADT) on the Highway stood at 59,879 vehicles in FY Mar 2015, having increased 15% y-o-y from 52,244 vehicles in FY Mar 2014 - ADT has risen at a CAGR of 15% over the past 5 years.
As with most concession-related projects, the Company is exposed to regulatory and single-project risks.
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Media contact
Ong Ju Laine
(603) 7628 1183
julaine@ram.com.my
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© Press Release 2015
