[RAM] RAM Ratings affirms AA1 rating of Indera Persada's rated bonds

RAM Ratings has affirmed the AA1 ratings of Indera Persada Sdn Bhd’s (the Company) RM280 million Fixed Rate Serial Bonds (2013/2028) and RM68 million Medium-Term Notes (MTNs) (2023/2031). The long-term ratings have a stable outlook. 

The reaffirmations are underpinned by the Company’s strong consolidated debt coverage metrics, anchored by the receipt of stable and adequate monthly concession payments. Indera Persada’s actual debt service coverage ratios (DSCRs) to date and projected DSCRs of at least 1.50 times for the remaining tenures of the debt facilities remain in line with a low-complexity AA1-rated private finance initiative or public-private partnership project. Nonetheless, with higher leverage following the issuance of the RM68 mil of MTNs at end-2023, we caution that financial discipline and prudence around future distributions will be crucial to avoid compromising future debt coverage and credit strength.

Post-construction of the Public Works Department’s (PWD) training centre – the project underlying the transaction – Indera Persada receives concession-backed monthly Availability Charges (ACs) and Maintenance Service Charges (MSCs) from the PWD, which are the sole source of bond repayments. The structural covenants of both debt issues further support the Company’s debt repayment capacity. In 2023, ACs and MSCs were received within an average of 15 days and 22 days, respectively, from invoice date, well below RAM’s 90-day stressed assumption.

As observed in previous years, the Company relies on advances from Digistar Corporation Berhad (Digistar), its ultimate parent company, to cover operations and maintenance (O&M) expenses beyond concession receipts. While this arrangement is uncommon for project financing transactions, from a cashflow perspective, the interests of bondholders remain protected as ACs are earmarked for debt repayment and cannot be used to meet O&M costs. Additionally, the DSCR computation excludes O&M expenses (and is thus not impacted). In any case, we view the risk of O&M non-performance as remote, as MSC deductions for non-compliance with key performance indicators (KPIs) have been manageable at 3.8% (approx. RM0.18 mil per annum) over the past three years. 

As with all concession-backed transactions, Indera Persada remains exposed to single-project and regulatory risks. Compensation prescribed in the Company’s concession agreement (CA) offers Serial Bond holders protection if the CA is terminated. The MTNs are secured against a corporate guarantee from Digistar to ensure better alignment of stakeholder interests and to provide bondholders recourse in adverse circumstances, though its effectiveness could be constrained by Digistar’s financial health. 


Analytical contacts
Davinder Kaur Gill
(603) 3385 2525
davinder@ram.com.my

Zachary Tan
(603) 3385 2612
zachary@ram.com.my

Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my