9 February 2021
Malaysian Rating Corporation (MARC) has downgraded its ratings on tolled-road concessionaire MEX II Sdn Bhd’s sukuk and junior bonds due to uncertainty of it securing additional funding.
In a statement on Tuesday, MARC downgraded the RM1.3bil Sukuk Murabahah programme to BBIS from BBBIS, and RM150mil junior Bonds to B from BB. The ratings remain on MARCWatch “negative”.
“Our rating actions are premised on the increasing likelihood that MEX II may not be able to put in place a liquidity facility that it had originally expected to procure by end-2020 to meet a principal and profit payment of RM68.7mil due in April 2021.
“We understand MEX II is continuing with negotiations to seek financial assistance; however, we note that its liquidity has deteriorated to an extent that has heightened the default risk without external cash support or maturity extensions, it said.
MARC also said MEX II has RM38.2mil due in October 2021 while cash in its finance service reserve account was RM7.7mil.
Due to the minimal liquidity headroom, the company’s viability rests on a successful restructuring of the Sukuk Murabahah.
It said additional funding will be sought to complete the stalled 16.8-km three-lane dual carriageway Lebuhraya Putrajaya-KLIA highway project (MEX extension).
MARC said while discussions about the restructuring are ongoing, how and when the negotiations will conclude are uncertain at this juncture. The current economic environment has compounded the challenges MEX II faces.
“In the circumstances, the absence of progress in obtaining a bridge facility in the coming months will result in further downgrades.
“Going forward, in the event a refinancing is successfully completed, we will reassess MEX II’s restructured profile and assign a new rating consistent with our assessment of the company’s capital structure, risk profile and prospects post-restructuring, ” the rating agency said.
The Lebuhraya Putrajaya – KLIA (MEX II) is an 18 KM, three-lane dual carriageway that will commence at Putrajaya Interchange and merge onto the existing Lebuhraya KLIA (FT26) in Sepang.