RAM to withdraw rating of MRCB Southern Link RM845m senior sukuk

A mutual termination of the 100%-owned Eastern Dispersal Link (EDL) concession appears under way

KUALA LUMPUR: RAM Ratings will withdraw the rating of MRCB Southern Link Bhd’s RM845mil senior sukuk (last rated C1 on Rating Watch, with a negative outlook) upon full settlement. 

The rating agency said on Thursday this follows the signing of the termination and settlement agreement between the government and the toll concessionaire for the 8.62-km Eastern Dispersal Link (EDL) - MRCB Lingkaran Selatan Sdn Bhd -- on Nov 12.

Under the termination and settlement agreement, the government will pay the concession company RM1.33bil of compensation following the abolition of toll collections for the EDL, since Jan 1, 2018, and the takeover of the EDL. 

RAM said the cash settlement is expected to be paid within 14 days (or any other later date agreed) of submission of a performance bond in relation to outstanding works for the highway, as agreed under the termination and settlement agreement. 

Part of the settlement proceeds will be utilised to fully repay all outstanding financing obligations under the senior sukuk, including any accrued and unpaid profit due as at the redemption date.

“Although we note that the government of Malaysia has held back its plan to abolish industry-wide toll collections for now, the outcome of the EDL’s settlement negotiations is pivotal to the sector’s stakeholders. 

“This is because it will set the tone and serve as a benchmark deal for other potential toll abolitions in the future,” says Davinder Kaur Gill, co-head of RAM’s infrastructure and utilities ratings.

“MRCBSL is the funding conduit for the EDL’s construction. Its financial commitments are supported by back-to-back payments from MRCB Lingkaran Selatan. 

“As such, we view both companies in aggregate from a credit standpoint.”