Maju Expressway’s missed payment has no immediate impact on MEX Capital’s sukuk rating — RAM Ratings

KUALA LUMPUR (June 21): The recent missed payment by Maju Expressway Sdn Bhd (MESB) of RM50 million principal due in June 2021 on the RM550 million Islamic MTN (IMTN) will not have an immediate impact on the C3/Negative rating of the RM1.35 billion Sukuk Musharakah issued by MEX I Capital Bhd (MEX Capital), according to RAM Rating Services Bhd (RAM Ratings). 

“Despite MESB’s missed payment, MEX Capital has sufficient cash reserves to honour the Sukuk’s upcoming profit payment in July 2021. Although available as an option to sukukholders, no default/dissolution event on the Sukuk has been declared to date as discussions on the Sukuk refinancing exercise is already at an advanced stage. Financial close is targeted for July 2021,” RAM Rating noted in a June 18 release.

MEX Capital is the parent company of MESB and the sole investor of the unrated RM550 million IMTN issued by MESB. The ultimate holding company of both MEX Capital and MESB is Maju Holdings Sdn Bhd.

“MESB is the concessionaire of the Maju Expressway (the highway) and MEX Capital’s sole cashflow source to repay the Sukuk. The C3/Negative rating of the Sukuk reflects imminent risk of default should the refinancing fail,” RAM Ratings noted.  

“While we do not expect immediate payment risk on the Sukuk, there is increasing liquidity pressure on both MESB and MEX Capital, amid persistently anaemic traffic volumes along the highway. This stems from ongoing pandemic-induced lockdowns and movement restrictions,” it added. 

CIMB Investment Bank, the IMTN facility agent, said in a filing with Bank Negara Malaysia’s Fully Automated System for Issuing/Tendering (FAST) website on June 15 that MESB has defaulted on its RM50 million bond principal after failing to redeem its outstanding amount.

MESB is undertaking a restructuring exercise that is expected to be completed by early August to address liquidity issues, according to a statement last week by NewParadigm Capital Markets Sdn Bhd, the financial adviser for the restructuring exercise.

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