Moody’s assigns A3 senior unsecured rating to sukuk notes

KUALA LUMPUR: Moody’s Investors Service has assigned an A3 senior unsecured rating to the proposed sukuk notes of up to US$1 billion to be issued under the US$2.5 billion multicurrency sukuk issuance programme ((P)A3) established by TNB Global Ventures Capital Bhd.

TNB Global Ventures Capital Bhd is a special purpose vehicle established in Malaysia by Tenaga Nasional Bhd (Tenaga, A3 stable).

In a statement yesterday, Moody’s rated the outlook for the sukuk as stable. The proceeds from the proposed sukuk would be used for general corporate purposes and to refinance certain maturing debt obligations.

“The A3 rating of the proposed sukuk is equivalent to Tenaga’s senior unsecured rating, because we view the sukuk as commensurate with a senior unsecured payment obligation, with sukuk holders ultimately relying on Tenaga for returns and principal repayments,” said Moody’s Vice-President and Senior Analyst Spencer Ng.

The rating on the proposed sukuk reflected the ultimate obligation of Tenaga to ensure that the periodic distribution amount is always maintained, and the existence of a purchase undertaking, which implies that the sukuk holders ultimately rely on the creditworthiness of Tenaga for repayment when the trust is dissolved.

Tenaga’s A3 rating, in turn, reflected the application of Moody’s rating methodology for government-related issuers, which combines Tenaga’s standalone credit quality, and a two-notch uplift based on Moody’s joint default analysis approach.

“This approach assumes a very high likelihood of support for Tenaga from the Malaysian government (A3 stable) in a stress situation,” it added.

After factoring in the incremental debt from the proposed sukuk issuance, Moody’s expected Tenaga’s financial leverage, as measured by retained cash flow (RCF)/debt, to dip below 17 per cent in 2018.

However, it said the company’s financial leverage should recover to the high-teens percentage range over the next 12-18 months, on the back of higher electricity sales and earnings contribution from the new power station projects, as they are commissioned. - Bernama