RAM Ratings has reaffirmed the AA1/Stable rating of Indera Persada Sdn Bhd's (the Company) RM280 mil Fixed Rate Serial Bonds (2013/2028) (the Bonds). The reaffirmation is premised on the receipt of stable and adequate concession payments to service the Company's financial obligations under the Bonds, underpinned by its strong debt coverage metrics.
Based on a steady inflow of Availability Charges (ACs), Indera Persada's debt service cover ratio (DSCR, with cash balances, post-distribution on payment months) is expected to stand at no lower than 1.69 times throughout the remaining tenure of the Bonds. This is higher than the minimum FSCR requirement of 1.50 times, and despite RAM's stressed assumption of delays in monthly and lump-sum payments from the Public Works Department (PWD).
Indera Persada is a single-purpose company set up to undertake the development of and provide asset-management services to the Centre of Excellence in Engineering and Technology (CREaTE) in Malacca, under an 18-year Concession Agreement (CA) with the Government of Malaysia (GoM) dated 18 March 2013. In return for the construction of CREaTE, the Company will be entitled to receive a highly predictable stream of monthly ACs and Maintenance Service Charges (MSCs) from the PWD, for a span of 15 years effective September 2016.
For this transaction, we have assumed that Indera Persada will fully utilise the MSCs received to support its operating expenses while ACs represent its sole source of repayment for the Bonds. Counterparty risk is deemed low as the ultimate obligor of monthly concession payments is the GoM, via the PWD.
The rating is moderated by the risk of delayed receipt of monthly ACs and MSCs. In 2020, the PWD AC payments have mostly been prompt, i.e. within 30-40 days from the date of invoice, except for some delays during the Movement Control Order. On the other hand, payment of MSCs hovered around 66 days in FY Sep 2019 and 63 days in 9M FY Sep 2020 due to admini