RAM Ratings has placed the AA3 rating of Besraya (M) Sdn Bhd’s RM700 million Sukuk Mudharabah Issuance Facility (2011/2028) on Rating Watch with a developing outlook.
The rating action follows the 13 October 2022 announcement by the Prime Minister on a toll rate reduction at the Sungai Besi Expressway and the Besraya Eastern Extension effective 1 January 2023, the quantum of which has yet to be revealed. The developing outlook is premised on the lack of details of the revised contractual arrangement between the highway concessionaire and the Government of Malaysia at this juncture.
While its prior debt coverage indicator with minimum finance service coverage ratios of 2.00 times means it is eligible for a rating upgrade based on RAM’s revised rating criteria for a matured highway, the latest developments may result in a possible change to the rating. The cashflow simulation indicates that a tariff reduction of beyond 15% is a downside risk to the Company’s current rating.
The rating house, expects the Rating Watch to be resolved within the next three to six months. It said it will continue to monitor the developments closely and make the necessary updates, once further details are available.
Besraya is the concessionaire for the Highway and has been operational since 1999. Its diminished traffic volumes amid the pandemic rebounded strongly following the easing of mobility curbs in August 2021 and the transition to COVID-19 endemicity since April 2022. In 1H FY Mar 2023 (April-September 2022), the Highway’s average daily traffic surpassed the pre-pandemic level of 158,000 vehicles, coming in at 167,058 vehicles. Its performance was supported by stronger weekend traffic, as well as the Highway’s improved infrastructure and connectivity following the opening of Kuchai Link 2 and Ramp 5A.
As a prudent measure, RAM analysis assumes future traffic will normalise to pre-pandemic levels as the traffic surge is expected to be temporary.
RAM’s Rating Watch highlights a possible change in an issuer’s debt rating. It focuses on identifiable events such as mergers, acquisitions, regulatory changes, and operational developments that place a rated debt under RAM’s special surveillance.
Issues are put on Rating Watch when some of the above-said events are expected to or have occurred. The Rating Watch, however, does not mean that the rating will inevitably be changed it said.
