Prasarana to go into debt market again

Capital raising: Prasarana will raise up to RM6bil to fund its ongoing projects which include the LRT3 and the existing projects that it has already approved.

It will raise up to RM6bil for this round of funding

KUALA LUMPUR: Prasarana Malaysia Bhd president and group chief executive officer Datuk Seri Azmi Abdul Aziz said the group will be raising additional debt in a few weeks to fund its ongoing projects.

“These include the light rail transit line three (LRT3) funding and the existing projects that we have already approved such as the upgrading works for the LRT lines and to fund the initial payment for LRT3.

“We will raise up to RM6bil for this round of funding,” he told StarBiz on the sidelines of the IFN Forum Asia 2017.

The Malaysian metro infrastructure operator has been raising funds from the capital markets “every year”.

“For last year, the sukuk which we issued was about 3% oversubscribed, which is a good indication from the market.

“For this year, we will head to the market within a month or two to finance projects that have been approved, and will ensure that the LRT3 construction will be completed on time by 2020,” he said.

“With this completion, it will generate better numbers for us and how we can be competitive in the market,” he added.

Azmi said the latest statistics from the World Economic Forum showed that Malaysia ranked number 11 for investments into public transport infrastructure.

“This is something that has been recognised by the international community,” he added.

He noted that Prasarana had received “good support” from the banks that are facilitating its debt issuances. “We have good business relations with the banks,” he said.

RAM Ratings in a report published last year noted that Prasarana’s balance sheet was “very weak” due to its heavy debt burden.

The ratings agency said Prasarana’s debt level had been rising over the last five years and had hit RM18.36bil as of December 2015, from RM13.91bil in December 2014, on additional borrowings to meet its capital expenditure and working capital requirements.

Despite the conversion of a loan from the government into equity, it said the group’s gearing ratio had more than doubled to 16.54 times as at end-December 2015.

The additional debt to be raised in a month or two would add to this debt burden on Prasarana.

Given its heavy debt burden, Prasarana’s balance sheet is deemed very weak, RAM Ratings said.

Meanwhile, AmInvestment Bank CEO Raja Teh Maimunah Raja Abdul Aziz said the bond market continued to be healthy, as indicated by the number of issuers that have continued to successfully raise money despite the outflows that have happened.

“We used to have almost 50% foreign money (in Malaysian Government Securities) and then that money kind of went away.

“Some people then commented that maybe Malaysia has ‘lost it’ since the money went out, but the reality is I am quite glad the money has gone out. This is because the foreign money also brought about additional volatility and our market was held at ransom in some ways,” she said.

“Every time money came in and out, the yield curve would move. The proof that the debt market is healthy is that for the last three weeks, there have been several issuers that have gone to the market, and these are big ones as nobody does less than RM1bil and the market is that liquid.

“Some of these issuers were able to raise money for a tenure of over 30 years,” Raja Teh Maimunah added.

On a similar matter, CIMB Islamic Bank CEO Rafe Haneef said the fund-raising momentum is expected to continue this year despite the present ongoing reflation trade that leads to greater outflows of funds from Malaysia.

“Today, we see around 25% of bonds being held by foreigners, but the market is deep enough to absorb these outflows. Malaysia is lucky because the Securities Commission has sufficiently developed the buy side and this has helped absorb the outflow of funds from Malaysia,” he said.

“If you look at the volume of transactions in the capital markets in Malaysia, we see an average of RM85bil-RM90bil of new issuances per year, and 70%-75% of the issuances are Islamic structured, including infrastructure sukuk with a longer tenure typically,” Rafe added.

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Business , Sukuk , Prasarana , infrastructure


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