A mutual termination of the 100%-owned Eastern Dispersal Link (EDL) concession appears under way
KUALA LUMPUR: RAM Ratings has placed the BB3 rating of MRCB Southern Link Bhd’s RM845mil senior Sukuk on rating watch, with a negative outlook.
It said on Wednesday its rating action follows the abolishment of toll collection at the 8.62-km Eastern Dispersal Link (EDL) since Jan 1, 2018. The EDL was taken over by the government.
RAM Ratings said at this juncture, talks were ongoing between the EDL toll concessionaire – MRCB Lingkaran Selatan Sdn Bhd – and the government, to mutually end EDL’s concession agreement and work out a final settlement amount.
“We expect to resolve the Rating Watch once details on the proposed settlement and, by extension, repayment of the company’s sukuk obligations are made available to RAM,” it said.
The ratings agency said as at Dec 31, MRCB Southern Link’s cash balances were RM17.45mil.
“Given the absence of toll revenue from Jan 1, 2018, the company’s cash pile will not be sufficient to settle the ensuing principal and profit payments on its senior Sukuk,” it said.
RAM estimates the drawdown of the MRCB Southern Link’s finance service reserve account bank-guarantee facility (FSRA BG) to alleviate cash shortfalls in honouring its financial obligations up to June 2018, barring any unexpected expenditure.
“Should negotiations on a final settlement be prolonged and without shareholder support or any other external liquidity support thereafter, the rating of the senior Sukuk is expected to be downgraded in anticipation of a potential default by the end of this year,” it said.
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