MARC has affirmed its AAA_(fg) rating on TRIplc Ventures Sdn Bhd’s (TVSB) RM240 million Senior Medium-Term Notes (Senior MTN) Programme with a stable outlook. As at October 12, 2017, the total outstanding notes under the rated programme stood at RM200 million. The rating reflects the credit strength of an unconditional and irrevocable guarantee provided by Danajamin Nasional Berhad (Danajamin) on the Senior MTN obligations. Danajamin carries an insurer financial strength rating of AAA/stable from MARC.

Wholly owned by TRIplc Berhad, TVSB is the concessionaire of Universiti Teknologi MARA’s (UiTM) Zone 1 Phase 2 project in Puncak Alam, Selangor, which is currently in the fourth year of the maintenance phase following the project’s completion in April 2014. Under the concession agreement, TVSB is entitled to receive availability charges (AC) and maintenance charges (MC) payments from the project lessee, UiTM, throughout the 20-year maintenance phase. The AC payments are fixed at RM42.5 million per annum, while the MC payments are subject to review every five years and are conditional upon TVSB meeting specified key performance indicators.

TVSB’s standalone rating is contingent on the company’s ability to meet the performance requirement, which is largely moderated by the straight forward nature of the maintenance works. The standalone rating also hinges on timely payment receipts from UiTM. Principally funded by the Ministry of Higher Education, the university is to make the necessary payments within 30 days of submission of the relevant invoices, largely reducing counterparty risk in the transaction. Any concern on payment delay is addressed by the minimum required balance and the build-up mechanism of the debt service reserve account.

TVSB’s operations were within expectations during the financial year ended May 31, 2017. Despite a month’s delay in AC receipts due to administrative issues, the company’s operating cash flow was higher at RM42.2 million as the company did not have any outstanding payments to the project contractors. Following dividend payment of RM10 million, TVSB’s free cash flow was about RM32.1 million. The company began paring down its debt in the financial year with a principal repayment of RM20.0 million, followed by a second principal repayment of RM20.0 million on October 10, 2017.

Under the base case projections, pre-restricted distribution minimum and average debt service cover ratios (DSCR) of 1.84 times and 2.12 times respectively for the remaining tenure of the Senior MTN are expected to provide a moderate buffer for any underperformance by the operator, TRIplc FMS Sdn Bhd during the maintenance phase. Under break-even scenarios, TVSB’s cash flows can endure increases of up to 30% in maintenance costs and MC reductions of up to 6%. The rating agency highlights that the company has limited room to make restricted distribution (dividend and Junior Notes interest payments) based on the minimum and average post-restricted distribution DSCR of 1.51 times and 1.75 times respectively. Any liquidity risks are further addressed by the ability to defer the Junior Notes interest payments to the next scheduled payment date if the post-restricted distribution DSCR covenant is not met.

Downside risks in the project’s credit profile are mitigated by the presence of the unconditional and irrevocable guarantee provided by Danajamin. Any revision in TVSB’s rating and/or outlook would largely hinge on a revision in Danajamin’s credit strength.

Contacts:
Adib Asilah, +603-2717 2943/ asilah@marc.com.my;
David Lee, +603-2717 2955/ david@maarc.com.my.