MARC RATINGS ASSIGNS PRELIMINARY RATING OF AAIS TO BERAPIT MOBILITY'S PROPOSED RM1.5 BILLION SUKUK PROGRAMME

MARC Ratings has assigned a preliminary rating of AAIS to Berapit Mobility Sdn Bhd's (BMSB) proposed Sustainability Islamic Medium-Term Notes Programme (sukuk programme) of up to RM1.5 billion. The outlook on the rating is stable.

The rating reflects the size and predictability of operating cash flow under the long lease agreements of 25 years, the protective features of the ring-fenced financing structure, and a very strong lease counterparty in the form of the federal government statutory body Railway Assets Corporation (RAC). The rating also factors in parent and project sponsor SMH Rail Sdn Bhd's strong capabilities in rolling stock manufacturing, assembly, and maintenance, repair and operations (MRO), as well as its healthy 20-year track record of timely project completion. These strengths are moderated by contract termination risk, execution risk, as well as potential delays in receipt of lease payments.

Under the transaction, BMSB will purchase and refurbish/replace 50 locomotives (including six spares) and 246 wagons from RAC under sale-and-leaseback agreements. This will be partly financed by proceeds from the rated sukuk programme, with lease payment streams from RAC forming the source of repayments. BMSB's average projected annual operating cash flow of RM101.9 million is more than sufficient to meet sukuk principal repayments for the first 15 years and provides headroom for cash build-up for subsequent years when lease rates decline. Cash flow predictability is underpinned by BMSB's entitlement to at least 24 days of monthly lease payments, as long as it meets contracted performance requirements for rolling stock availability. To this end, SMH Rail's experience in rolling stock manufacturing and MRO would ensure BMSB has the capacity to maintain the rolling stock assets to meet the required availability and performance standards. To furth