MARC has placed Sacofa Sdn Bhd’s (Sacofa) RM160.0 million Sukuk Istisna and its special purpose subsidiary, Sarawak Gateway Sdn Bhd’s (Sarawak Gateway) RM240.0 million Sukuk Ijarah (collectively referred to as the Sukuk) rated AAAIS on MARCWatch Developing. The MARCWatch placement incorporates the planned refinancing of the Sukuk and the indulgence granted by Sukukholders in connection with an expected noncompliance of its debt-to-equity ratio (D/E) covenant by Sacofa. The latter has been granted an extension of time to comply with the D/E covenant of 4.0 times with effect from February 18, 2009 instead of November 18, 2008. The proposed refinancing of the Sukuk is targeted for completion in February 2009.

Notwithstanding, the State Financial Secretary Sarawak which has a 60% stake in Sacofa, has provided an explicit letter of willingness to exercise the warrants under a proposed refinancing exercise of the existing Sukuk to ensure that Sacofa’s D/E covenant does not exceed 4.0 times prior to the refinancing of the Sukuk. The proposed refinancing exercise comprises RM400 million Islamic Medium Term Notes and RM100 million Islamic Commercial Papers, with a combined limit of RM450 million.

Sacofa was incorporated in July 2001 to spearhead the state government of Sarawak’s initiatives to build and expand the telecommunication network infrastructures in the state. Sacofa was granted an exclusive 20-year concession in 2002 to construct and maintain telecommunication towers and structures (towers) that are subsequently leased to major telecommunication companies (telcos), Celcom (Malaysia) Bhd. (Celcom), Maxis Broadband Sdn. Bhd. (Maxis) and Digi Telecommunications Sdn. Bhd. (DiGi) under a 10-year licensed agreement which commenced in June 2005. In exchange, the telcos make monthly rental payments that constitute the main source of repayment for the Sukuk.

For financial year ended December 31, 2007 (FY2007), Sacofa’s revenue grew by 65.6% to RM61.1 million arising mainly from higher revenue contribution from the towers segment backed by a total of 327 telco towers (FY2006: 151). Based on interim results ending 31 October 2008, Sacofa’s revenue continued on an uptrend to RM84.2 million backed by 395 telco towers and its D/E ratio stood at 4.43 times. MARC notes that Sacofa is expected to achieve 411 towers by end-FY2008.

MARC expects to resolve the MARCWatch placement in February 2009 upon the refinancing of the Sukuk.

Contacts:
Anthony Eng, 03-2090 2255/ anthony@marc.com.my;
Azlina Mohamed Noor Beg, 03-2090 2254/ azlina@marc.com.my