[RAM] RAM Ratings affirms INTI's AAA(fg)/Stable issue rating notwithstanding parent's default

RAM Ratings has affirmed the AAA(fg)/Stable rating of INTI Universal Holdings Sdn Bhd’s (INTI or the Group) RM300 mil 5-year guaranteed Medium-Term Notes 2023/2028 (MTN) in view of the irrevocable and unconditional guarantee provided by Credit Guarantee and Investment Facility (CGIF, a trust fund of the Asian Development Bank and rated AAA/Stable/P1 by RAM). 

INTI’s major shareholder is XJ International Holdings Co. Ltd. (XJ), with an effective 51% interest. Listed in Hong Kong, XJ is one of China’s largest private higher education providers. On 2 March 2024, XJ defaulted on its US$350 mil zero-coupon convertible bonds, prompting a winding-up petition by bondholders. Though the winding-up petition was dismissed by the High Court on 28 August 2024, bondholders have appealed the decision on 16 September 2024, with the appeal hearing pending. CGIF has imposed restrictions on INTI which will apply during the tenure of the guaranteed MTN. These restrictions mitigate concerns over excessive fund outflows from INTI to support XJ, ensuring the former’s ability to service the MTN and keep CGIF’s guarantee intact for bondholders, as well as sustain its local operations without undue interruptions. That said, it could still be possible for XJ to dispose of INTI, a possibility that we cannot rule out. 

On a standalone basis, INTI’s performance has exhibited a declining trend, although its balance sheet remains relatively healthy.  Student enrolment had declined by 3% year-on-year as-at December 2023, indicating limited success in capitalising on the recovery in student demand (PHEIs’ total student enrolment grew 9% over the same period). Consequently, topline (FY Aug 2023: RM205.5 mil) and operating profit before depreciation, interest and tax (FY Aug 2023: RM39.5 mil) recorded a modest drop of 3% and 18% year-on-year, respectively. INTI’s funds from operations (FFO) debt coverage stood at 3.12 times, with gearing at 0.05 times as at end-FY Aug 2023. Following the RM165 mil MTN drawdown in November 2023, we expect prospective FFO debt coverage to average 0.28 times, while gearing to rise to 0.59 times over the next three years. These metrics are, however, still healthy and are better than our initial projections as INTI did not issue the entire RM300 mil nor did it distribute dividends to its parent company, XJ, as previously expected. Meanwhile, INTI’s liquidity remains adequate, with projected cash balances of RM225.3 mil in FY Aug 2024. 


Analytical contacts
Darrel Tiang
(603) 3385 2531
darrel@ram.com.my

Thong Mun Wai
(603) 3385 2522
munwai@ram.com.my

Media contact
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