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Saturday November 24, 2012

Long term ratings of MRCB Southern Link sukuk downgraded

KUALA LUMPUR: The long term ratings of MRCB Southern Link's RM845mil secured senior sukuk (2008/2025) and RM199mil junior sukuk (2008/2027) have been downgraded

RAM Rating Services Bhd said the ratings of the two sukuk were lowered to C3 from BB3 and C1 but remained on negative Rating Watch.

MRCB Southern Link is a funding conduit for the 8.1-km Eastern Dispersal Link Expressway (EDL) in Johor Baru.

Although it opened to the public on April 1 this year, the Government had stated EDL would not start collecting toll despite the terms of its concession agreement.

RAM Ratings said the downgrades were on concerns about MRCB Southern Link's cash shortfall in meeting the next profit payments on both senior and junior Sukuk on Dec 21.

The concerns were if the government fails to take over the EDL or if the government could not work out a short-term solution to address the shortfall.

RAM Ratings said another factor hinged on the proposed amendments to the Senior and Junior finance service reserve account bank guarantees.

It said the amendments were to allow the company to draw down on the facilities prior to the projected default next month.

A sukukholders meeting would be held on Dec 11to agree on the amendments.

“We have been informed by MRCB Southern Link that efforts to conclude all three fronts, particularly on the implementation of a short-term solution, are ongoing,” it said.

RAM Ratings also said MRCB Southern Link had RM21.3mil cash as at Nov 15, of which RM21.2mil was trapped in the Junior Sukuk coupon special reserve account.

“The rm21.2mil has been pre-funded at the point of issuance and funds can only be withdrawn to meet obligations on the Junior Sukuk.

“ MRCB Southern Link has to rely on an advance of RM5.3mil from its engineering, procurement and construction contractor (a sister company) to meet an interest payment on the RM220mil syndicated transferable term loan that ranks pari passu with the senior sukuk,” it said.

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