RAM Ratings affirms rating of EKVESB's guaranteed sukuk

RAM Ratings has affirmed the AAA(bg)/Stable rating of EKVE Sdn Bhd's (EKVESB or the Company) Guaranteed Sukuk Murabahah Facility of up to RM1 bil in Nominal Value (the Sukuk). The rating reflects irrevocable and unconditional kafalah guarantees extended by Maybank Islamic Berhad and Bank Pembangunan Malaysia Berhad, (both rated AAA/Stable/P1) for Tranche 1 and 2 issued under the facility, respectively. The guarantees enhance the Sukuk's credit profile beyond its standalone position.

EKVESB holds a 50-year concession from the Government of Malaysia for the East Klang Valley Expressway (EKVE or the Expressway), a 36.16 km closed-toll system which starts from Sungai Long in Kajang and ends at Ukay Perdana in Ampang (the Project). The Expressway's construction progress remains delayed, standing at 88.23% as of 25 June 2024 (scheduled: 94.29%).

From the originally scheduled completion date of 9 September 2019, the project has faced prolonged and repeated delays. Initially set back due to land acquisition issues, the Project was then delayed by pandemic lockdowns with the current construction progress now stalled by the lack of funding. As of 25 June 2024, construction was 88.23% completed. Past extensions of time were granted, with the most recent extension formalised by a fifth Supplemental Concession Agreement, revising the completion date to 31 Dec 2025  a further delay of another year. 

The transaction's funding and liquidity positions are still critically tight, with the sukuk guarantees fees unpaid since July 2022 as the Company sought the guarantors' indulgence for delayed payments, which it obtained.  Despite the liquidity constraints, there aren't any adverse developments or event of default under the guarantees or the Sukuk. That said, AZRB, the kafalah guarantors and the government remain committed to financially backing the Project, as evidenced by additional funding secured to see it throug