MARC has assigned a long term rating of AA-ID to Sistem Penyuraian Trafik KL Barat Sdn Bhd’s (“SPRINT”) proposed RM510 million Al-Bai’ Bithaman Ajil Islamic Facility (“Restructured BaIDS”) to restructure the existing RM510 million Al-Bai Bithaman Ajil Islamic Debt Securities issued in August 2001 (“BaIDS 2001”). Concurrently, we have reaffirmed the rating of SPRINT’s RM365 million Bank Guaranteed Serial Fixed Rate Bonds of A+(bg) and upgraded the rating of the Revolving Underwritten Facility of up to RM125 million to MARC-1. SPRINT is the concessionaire of the SPRINT Highway comprising the Damansara Link, Kerinchi Link and the Penchala Link.

The rating reflects the improved financing structure which among others provides SPRINT the ability to service its debt obligations comfortably. The repayment profile under the new financing structure was restructured to better match the expected cash flow projection of SPRINT. In addition, stricter financial covenants have also been imposed which restraint SPRINT from making any dividend payments or interest payments on its loan stocks during the tenure of the Restructured BaIDS unless the concessionaire has fulfilled certain conditions. The rating is further supported by the undertaking from SPRINT’s shareholders to invest up to RM200 million with the initial RM100 million invested at the issuance of the Restructured BaIDS.

Although traffic volume on the SPRINT highway has consistently failed to match the initial traffic projections by the earlier traffic consultant, Symonds Travers Morgan (Malaysia) Sdn Bhd, it has been on an upward trend with average annual growth rate of 42.5%
between FY2002 and FY2005. In FY2005, traffic volume on the SPRINT highway reached 42.1 million vehicles vis-à-vis 35.1 million vehicles in FY2004. The Damansara Link accounted for almost half of the total traffic volume or 20.9 million vehicles followed by Kerinchi Link with 14.9 million vehicles and Penchala Link at 6.3 million vehicles. In tandem with the traffic growth, SPRINT’s core revenue from tolling operations also increased to RM55.0 million in FY2005 from RM41.2 million in FY2004.

The repayment profile for the Restructured BaIDS was structured to better match SPRINT’s cash flow projection which in turn was based on the traffic projections by Halcrow Consultants Sdn Bhd (“Halcrow”); the appointed consultant for this restructuring exercise. MARC noted that the repayment of the Restructured BaIDS will only commence in FY2017 with the final repayment expected in FY2021. Furthermore, we noted that the restructuring exercise is also supported by the Government following the approval to defer the repayment of the outstanding Government Support Loans.

Based on the above proposal coupled with the expected improvement in traffic demand along the three highway links, SPRINT’s ability to repay and service its debt obligations with a minimum Debt Service Coverage Ratio (“DSCR”) of 1.5x should be achievable. Moreover, the undertaking by the shareholders of SPRINT to invest an additional RM100 million in the concessionaire (after the initial injection of RM100 million upon the issuance of the Restructured BaIDS) should provide further comfort to the BaIDS holders to ensure that the credit profile of SPRINT is consistent with the assigned rating.