MARC has affirmed a long term rating of AA-ID to Sistem Penyuraian Trafik KL Barat Sdn Bhd’s (“SPRINT”) RM510 million Al-Bai’ Bithaman Ajil Islamic Facility (“BaIDS”). Concurrently, we affirmed 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, the Kerinchi Link and the Penchala Link. The issuer’s stand alone debt rating is equivalent to the lowest rating of the banks in the consortium of guarantors (weak link approach). Since MARC’s last review, the lowest rating of the banks in the consortium of guarantors has been upgraded from A+ to AA-. As the bank guaranteed (bg) rating does not enhance or give a favourable effect to the issue’s stand alone rating, MARC has not applied the bg rating to the Serial Fixed Rate bond facility. Accordingly, the rating for the Serial Fixed Rate Bond has been rationalized to AA- to reflect the issuer’s stand alone rating.

The rating reflects the improved financing structure which among others provides SPRINT the ability to service its debt obligations comfortably. The repayment profile for the 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 the restructuring exercise in 2005. In addition, strict 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 BaIDS unless the concessionaire has fulfilled certain conditions. The rating is also supported by the undertaking from SPRINT’s shareholders to invest up to RM200million in SPRINT Holdings Sendirian Berhad. The undertaking by the shareholders of SPRINT to invest an additional RM100 million in the concessionaire (after the initial injection of RM100 million which has been effected upon the issuance of the BaIDS in December 2005) should provide further comfort to the BaIDS holders to ensure that the credit profile of SPRINT is consistent with the rating.

Traffic volume on the SPRINT highway has been on an upward trend with average annual growth rate of 34.0% between FY2002 and FY2006. In FY2006, traffic volume on the SPRINT highway reached 46.2 million vehicles vis-à-vis 42.1 million vehicles in FY2005. The Damansara Link accounted for almost half of the total traffic volume or 21.6 million (FY2005: 20.9 million) vehicles followed by Kerinchi Link with 16.6 million (FY2005: 14.9 million) vehicles and Penchala Link at 8.0 million (FY2005: 6.3 million) vehicles. In tandem with the traffic growth, SPRINT’s core revenue from tolling operations also increased by 12.4% to RM61.8 million in FY2006 from RM55.0 million in FY2005.

MARC noted that the repayment of the BaIDS will only commence in FY2017 with the final repayment expected in FY2021. Furthermore, we noted that the restructuring exercise was supported by the Government, following the approval to defer the repayment of the outstanding Government Support Loans. The better repayment profile coupled with the expected improvement in traffic demand along the three links, SPRINT’s ability to repay and service its debt obligations with a minimum Debt Service Coverage Ratio (“DSCR”) of 1.5:1 should be achievable. DSCR as at FYE 31 March 2006 stood at 2.67:1.



MARC views that the ability to predict the traffic volume and revenue performance accurately is the key risk area in assessing the credit quality of toll road projects, taking into account previous experience both local and abroad. The external factors including but not limited to slower than expected development growth in the catchments areas; economic cyclicality and demographic trend may have an impact on the demand of the toll road facilities. Notwithstanding, the strong shareholders’ support which serves as a form of financial flexibility to withstand the downside events provides some comfort to the bondholders. Moreover, the revised traffic projection in 2005, which form the basis of the BaIDS’ restructuring last year is considered to be more reasonable as compared to the more bullish initial traffic projection.