New high for Dagang NeXchange Bhd
KUALA LUMPUR: RAM Ratings has reaffirmed the RM1bil debt notes issued by West Coast Expressway Sdn Bhd (WCE) due to facilities extended by Bank Pembangunan Malaysia Bhd and Danajamin Nasional Bhd.
The rating agency said on Monday the ratings of Tranche 1 and Tranche 2 of WCE's RM1bil guaranteed Sukuk Murabahah programme (2015/2036) were maintaned at AAA(bg)/Stable and AAA(fg)/Stable, respectively.
“The ratings reflect irrevocable and unconditional kafalah facilities extended by AAA-rated Bank Pembangunan and Danajamin Nasional, which enhance the Sukuk’s credit standing beyond WCE’s stand-alone credit strength,” it said.
Construction of the expressway is undertaken by a consortium comprising IJM Construction Sdn Bhd and WCE Holdings Bhd
(WCE Holdings) – IJMC-KEB Joint Venture.
However, RAM noted that as at end-August 2017, construction progress was 39.51% – behind the scheduled 47.01% or 4.23 months, mainly due to delays in land acquisitions.
“That said, the company expects to meet the scheduled completion date by shortening the project’s timeline and accelerating physical works.
“Owing to delays in securing land rights, the project has seen land acquisition costs exceed the government’s allocation of RM980mil,” it said.
RAM said WCE plans to partially address the additional land costs via the utilisation of cost savings from project expenditure and other ancillary income.
With some remaining private land yet to be acquired, any potential further land costs overruns will be funded via equity injection from its shareholders.
Based on RAM’s sensitised cashflow analysis (which incorporates a six-month delay, construction cost increases as well as land cost overruns), WCE may need to rely on financial support to honor its financial obligations by August 2018 (or by February 2020 if there are no cost overruns and delays).
“The long tenure of the concession would also provide room for a refinancing exercise.
“Additionally, West Coast’s shareholders – WCE Holdings and Road Builder (M) Holdings Bhd – have irrevocably and unconditionally undertaken to provide financial support to ensure the completion of the WCE, and up to RM400mil under a cash-deficiency undertaking to cover any short fall that the company might face in meeting its financial obligations.
“As with most concession-related projects, the company is exposed to regulatory and single-project risks,” RAM said.
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