MARC has affirmed the AA-(bg) and AA-ID rating on Sistem Penyuraian Trafik KL Barat Sdn Bhd’s (SPRINT) RM365 million Bank Guaranteed Serial Fixed Rate bonds (BG Bonds) and RM510 million Al Bai Bithaman Ajil Islamic Debt Securities (BaIDS) respectively. The ratings outlook is stable for both facilities. The rating on the BG Bonds reflects the strength of the lowest financial institution rating of a consortium of three bank guarantors. MARC currently maintains a long-term financial institution rating of AA-/stable on AmInvestment Bank Berhad and public information financial institution ratings of AAA on Public Bank Berhad and AA- on RHB Bank Berhad. The stable rating outlook reflects that MARC’s views on the ratings of all three banks remains firmly in place within their assigned ratings.

The affirmed rating on the BaIDS reflects SPRINT’s strong actual and projected financial coverages which, at present, rely heavily on financial support provided by its shareholders to cover ongoing operating and financial obligations. SPRINT had received RM50 million from its shareholders during financial year ended March 31, 2009 (FY2009) by way of subscription to its loan stocks issuance. SPRINT is currently anticipating a final capital injection by SPRINT’s shareholders sometime in the course of 2010, in fulfilment of their equity commitments under the rated facilities. Thereafter, SPRINT’s ability to meet scheduled debt service obligations will be dependent upon the SPRINT highway realizing forecast growth in traffic volume and projected toll revenues. The stable outlook on the BaIDS reflects MARC’s expectations that SPRINT’s credit profile will remain stable over the near to medium term, with continued capital support from its shareholders into 2010.

SPRINT’s stand-alone credit profile remains weak as a result of recurring operating losses which are expected to persist through FY2013. Although the toll road operator continues to report year-on-year increases in its operating profit before financing costs, SPRINT’s substantial annual financing costs on its high debt burden continue to be a drag on its profitability and cash flow. SPRINT has yet to generate adequate cashflow to support its financing charges and has been relying on continued support from its shareholders to remain in compliance with its debt service coverage and financial leverage covenants under the rated facilities.  

SPRINT is the highway concessionaire of the 25.5 km SPRINT highway designed to ease traffic congestion in the western part of Kuala Lumpur. The SPRINT highway comprises three links: Kerinchi Link, Damansara Link and Penchala Link. The Kerinchi and Damansara Links commenced tolling operations in September 2001 whilst the Penchala Link commenced tolling in March 2004. SPRINT is wholly-owned by Sistem Penyuraian Trafik KL Barat Holdings Sdn Bhd (SPRINT Holdings) which in turn is owned by Lingkaran Trans Kota Holdings Berhad (LITRAK) (50%), Gamuda Bhd (GAMUDA) (30%) and Kumpulan Perangsang Selangor Bhd (KPSB) (20%). GAMUDA, through its substantial shareholding of more than 46% since 2000 in Bursa-listed LITRAK, is deemed as the majority shareholder in SPRINT with an approximate total shareholding interest of 53%. (MARC maintains a public information corporate credit rating of AA-/MARC-1 on GAMUDA.)

SPRINT recorded lower year-on-year traffic growth of 4.6% during calendar year 2008 (2007: 6.6%). The decline in tolled traffic on Damansara Link in year 2008 was offset by higher traffic demand on Kerinchi Link and Penchala Link, which recorded traffic growth of 6.3% and 15.9% respectively. For FY2009, SPRINT achieved revenues of RM115.5 million (FY2008: RM94.4 million). The traffic consultant’s traffic forecast assumes fairly strong traffic volume growth on both Kerinchi and Penchala Link. Kerinchi Link’s average daily traffic (ADT) is expected to reach 113,428 vehicles in 2015 from 72,732 vehicles in 2010 while ADT at Penchala Link is expected to reach 80,377 vehicles by 2015 (projected ADT 2010: 47,302). While the difference between the Kerinchi Link and Penchala Link’s actual and forecast (Halcrow Consultant Sdn Bhd’s 2005 forecast) traffic has been positive, projected toll revenues of the Damansara Link remains subject to the risk that traffic growth could under-perform. The government deferred its January 2008 first scheduled toll rate revision for Damansara Link and Kerinchi Link and has been paying compensation to SPRINT for the loss of revenue.

SPRINT’s debt service ability remains favourable with FY2009 facility debt service coverage ratio (DSCR) at 2.25x, which is in compliance with the required minimum DSCR of 1.50x. MARC, however, cautions that SPRINT’s financial position could come under stress with heavy debt repayments in 2012 should toll revenues fall short of its projections.

Contacts:
Sandeep Bhattacharya 03-2090 2247 / sandeep@marc.com.my;
Khairul Emran Mahmud 03-2090 2278 / emran@marc.com.my