MARC has assigned a long-term rating of AAID (AA Flat, Islamic Debt) with stable outlook, to MTD InfraPerdana Bhd’s (MTD InfraPerdana) Islamic Medium Term Notes (IMTN) programme of up to RM700 million. The rating reflects the robust financial profile of MTD InfraPerdana, which is supported by the strong traffic from the matured toll highways under the stable of its two wholly-owned subsidiaries, namely MTD Prime Sdn Bhd (MTD Prime) and Metramac Corporation Sdn Bhd (Metramac). The rating, however, is moderated by the potentially weak capitalization and financial flexibility of MTD InfraPerdana going forward, exacerbated by shareholder-friendly proposals. The company has proposed that a nominal amount of RM400 million out of the RM700 million IMTN proceeds be used for the payment of dividends or any other distribution including capital repayment to the shareholders of the company.

MTD InfraPerdana is an investment holding company listed on the Main Board of Bursa Malaysia. Currently the company has interests in three toll road facilities through its wholly-owned subsidiaries, namely MTD Prime and Metramac. MTD Prime is the concessionaire for the Kuala Lumpur-Karak Highway (KLK) and its extension, the East Coast Expressway 1 (ECE1). The 60km KLK is the main artery road connecting the Klang Valley and Karak town. The 169km ECE1 commences from Karak to the Pahang-Terengganu border. Metramac, the tolling concessionaire for the Kuala Lumpur East-West Link Expressway and KL-Seremban Expressway, was acquired from Metacorp Berhad (Metacorp) in December 2005.

MTD InfraPerdana’s revenue has been on an upward trend during the past three financial years. Strong earnings growth is projected in 2008 with the hike in toll rates for KLK beginning on 1 January 2007. The company expects toll revenue to grow by 6.1% per annum to reach RM531.2 million by year 2021, which is the final year of the IMTN programme. Its cash flow projections are expected to be robust, with its finance service coverage ratio expected to average more than 3.0 times throughout the tenure of the IMTN even with the exclusion of the projected cash flows from Metramac. MARC recognizes some uncertainty arising from ongoing litigation between Fawziah Holdings Sdn Bhd (FHSB) and Metramac in respect of advertising rights. However, little information is available concerning the litigation and MARC cannot predict its outcome. In a related development, MTD InfraPerdana is seeking full potential damages for a fundamental breach of representation from Metacorp in connection with Metacorp’s earlier sale of Metramac shares. MARC expects overall credit quality of MTD InfraPerdana to remain sound even if the litigation outcome proves to be unfavourable.

The company’s borrowings have been maintained at conservative levels. However, with the expected drawdown of the IMTN facility and proposed capital repayment exercise in 2007, MTD InfraPerdana’s DE ratio is expected to increase substantially from less than 0.7 times currently.

The rating outlook is stable. MTD InfraPerdana’s debt service and coverage levels are expected to remain strong. MARC will continue to monitor developments related to the outstanding litigation.