Thursday, Nov 25, 2004
MARC has reaffirmed the rating of AAID for MHS Aviation Berhad’s (MHSA) Al-Bai Bithaman Ajil Islamic Debt Securities (BaIDS). The reaffirmation reflects the company’s continued dominant position in the provision of aviation services to the oil and gas industry, favourable outlook prevailing in the oil and gas industry and strong cash flow protection to the bondholders derived from the high proportion of contractual revenue and monies deposited in the designated accounts.
MHSA has a competitive edge in the provision of helicopter services to the oil and gas industry, evidenced by its established business relationship with multinational companies such as ExxonMobil Exploration and Production Malaysia Inc. (EMEPMI), PETRONAS Carigali Sdn Bhd (PCSB) and Sarawak Shell Berhad (SSB).
On the back of the current high oil prices, the offshore exploration and production activities are expected to be more active going forward. In tandem with that, entities servicing the oil and gas industry, like MHSA, will reap benefits from more activities in the industry.
Notwithstanding the higher revenue in FY2003, MHSA reported lower profit before tax attributable to a more than three-time surge in its operating lease expenses. The higher operating lease expenses were in relation to the leasing of helicopters to replace the Company’s ageing Sikorsky S61N Helicopters (S61N). While profitability took a dip in the latest fiscal year, MHSA’s cash flow position remains intact. Its DSCR of 7.2x vis-à-vis the covenanted level of 2.0x reflects sufficient protection to the bondholders.
To date, an amount of RM15.4 million had been deposited into the designated accounts. Part proceeds from the planned disposal of S61N estimated at around RM16.0 million will be deposited into the sinking fund account, subject to bondholders’ approval. The current outstanding balance of the BaIDS stands at RM40.0 million; after the first scheduled redemption of RM20.0 million in September 2004.
Another positive factor is the credit support provided to the BaIDS by the subordination of the JNs. The reaffirmation of A+ID for the JNs reflects the subordinated status of the JNs in relation to the security coverage and the payment waterfall as well as the put and call option feature incorporated in the issue structure. Under the structure, the BaIDS are secured by a first charge and assignment over all existing service contract proceeds. Redemption of the JNs will only commence after the full redemption of the BaIDS in 2006, lending support to the rating of the BaIDS and mitigating the risk of cross default. A put and call option incorporated in the JNs’ issue structure will have the effect of accelerating the redemption of the JNs in the year 2009, the exercise date of the option.
MHSA has a competitive edge in the provision of helicopter services to the oil and gas industry, evidenced by its established business relationship with multinational companies such as ExxonMobil Exploration and Production Malaysia Inc. (EMEPMI), PETRONAS Carigali Sdn Bhd (PCSB) and Sarawak Shell Berhad (SSB).
On the back of the current high oil prices, the offshore exploration and production activities are expected to be more active going forward. In tandem with that, entities servicing the oil and gas industry, like MHSA, will reap benefits from more activities in the industry.
Notwithstanding the higher revenue in FY2003, MHSA reported lower profit before tax attributable to a more than three-time surge in its operating lease expenses. The higher operating lease expenses were in relation to the leasing of helicopters to replace the Company’s ageing Sikorsky S61N Helicopters (S61N). While profitability took a dip in the latest fiscal year, MHSA’s cash flow position remains intact. Its DSCR of 7.2x vis-à-vis the covenanted level of 2.0x reflects sufficient protection to the bondholders.
To date, an amount of RM15.4 million had been deposited into the designated accounts. Part proceeds from the planned disposal of S61N estimated at around RM16.0 million will be deposited into the sinking fund account, subject to bondholders’ approval. The current outstanding balance of the BaIDS stands at RM40.0 million; after the first scheduled redemption of RM20.0 million in September 2004.
Another positive factor is the credit support provided to the BaIDS by the subordination of the JNs. The reaffirmation of A+ID for the JNs reflects the subordinated status of the JNs in relation to the security coverage and the payment waterfall as well as the put and call option feature incorporated in the issue structure. Under the structure, the BaIDS are secured by a first charge and assignment over all existing service contract proceeds. Redemption of the JNs will only commence after the full redemption of the BaIDS in 2006, lending support to the rating of the BaIDS and mitigating the risk of cross default. A put and call option incorporated in the JNs’ issue structure will have the effect of accelerating the redemption of the JNs in the year 2009, the exercise date of the option.