MARC affirms ratings on Kesturi’s senior sukuk, junior bonds

KUALA LUMPUR: Malaysian Rating Corp Bhd (MARC) has affirmed its stable rating on Konsortium Lebuhraya Utara-Timur (KL) Sdn Bhd’s (Kesturi) due to the satisfactory traffic performance of Duta-Ulu Kelang Expressway (DUKE) and the near-completion status of DUKE Phase-2.
It has ratings of AA-IS and A- for Kesturi’s RM2.3 billion sukuk musharakah (senior sukuk) and RM180 million redeemable secured junior bonds respectively.
Kesturi, which is wholly owned by Ekovest Bhd, is the toll concessionaire for the 18km DUKE and 16km DUKE Phase-2, which is under construction under a build-operate-transfer model. The concession period is until August 2059 with an option to extend for 10 years. As at Sept 30, 2016, the overall construction progress of DUKE Phase-2 was 90.1% against the scheduled progress of 96.6%.
The ratings also consider the sufficient liquidity buffer in the project accounts and manageable debt amortisation profile to withstand any cash flow mismatch.
“MARC views the risk of a prolonged construction delay of more than six months from the new completion date of DUKE-2 as low, as its engineering, procurement and construction (EPC) contractor Ekovest Construction Sdn Bhd (ECSB) has taken additional measures to prevent further progress delay,” MARC said in a statement yesterday, adding that issues related to project site and traffic management in certain areas that had led to the delay, have now been resolved.
It said the stable outlook on the ratings assumes traffic performance on DUKE would largely be in line with projections and DUKE Phase-2 would not experience prolonged delay from the new completion date.
“The ratings may face downward pressure if Kesturi’s credit metrics deteriorate due to an adverse development on the DUKE Phase-2 project and prolonged traffic underperformance,” said MARC.