RAM Ratings to withdraw negative rating of MRCBSL’s Senior Sukuk upon full settlement

KOTA KINABALU: RAM Ratings will withdraw the rating of MRCB Southern Link Bhd’s (MRCBSL) RM845 million Senior Sukuk (last rated C1 on Rating Watch, with a negative outlook) upon full settlement.

This follows the signing of the termination and settlement agreement between the government of Malaysia and the toll concessionaire for the 8.62-km Eastern Dispersal Link (EDL or the Highway) - MRCB Lingkaran Selatan Sdn Bhd (MRCB Lingkaran Selatan) - on November 12, 2018.

In a press statement, it noted that under the termination and settlement agreement, the government of Malaysia (as represented by the Ministry of Works) has agreed to pay the concession company approximately RM1.33 billion of compensation following the abolition of toll collections for the EDL (since January 1, 2018), and the takeover of the EDL.

It added, the cash settlement is expected to be paid within 14 days (or any other later date agreed) of submission of a performance bond in relation to outstanding works for the highway, as agreed under the termination and settlement agreement.

“Part of the settlement proceeds will be utilised to fully repay all outstanding financing obligations under the Senior Sukuk, including any accrued and unpaid profit due as at the redemption date.

“Although we note that the government of Malaysia has held back its plan to abolish industry-wide toll collections for now, the outcome of the EDL’s settlement negotiations is pivotal to the sector’s stakeholders.

“This is because it will set the tone and serve as a benchmark deal for other potential toll abolitions in the future,” highlights RAM’s Infrastructure and Utilities Ratings co-head Davinder Kaur Gill.

MRCBSL is the funding conduit for the EDL’s construction. Its financial commitments are supported by back-to-back payments from MRCB Lingkaran Selatan.

“As such, we view both companies in aggregate from a credit standpoint,” it concluded.