Saturday November 17, 2012
MARC downgrades Tanjung Langsat Port’s sukuk, notes programme
PETALING JAYA: Malaysian Rating Corp Bhd (MARC) has downgraded its ratings on Tanjung Langsat Port Sdn Bhd’s (TLP’s) RM250mil sukuk musyarakah bonds and RM135mil musyarakah commercial papers/musyarakah medium-term notes programme (MCP/MMTN) to BBB+IS and MARC-3ID/BBB+ID from A-IS and MARC-2ID/A-ID respectively.
The downgrade reflects TLP’s continued losses and weak cashflow which arose from a delay in the commencement of its port operations. This has resulted in erosion of its shareholders’ funds and heavy reliance on sale of land to meet its principal repayments which commenced in July 2012.
“The negative rating outlook incorporates MARC’s view that it will be challenging for TLP to achieve sufficient near-term improvement in earnings and cashflow from its port operations to address its obligations on the sukuk in light of its unused tank terminal complex and modest utilisation of dry cargo facilities,” it said in a statement.
Although the wholly-owned unit of Johor Corp (JCorp) had undertaken several intitiatives to generate stronger core income, MARC said that it would not be sufficient to significantly improve its cashflow position in the short term.
TLP will be expected to rely on land sales or further monetary support from JCorp to meet its upcoming RM20mil repayment in July 2013. However, its remaining land assets are limited to the sale of 224.8 acres of land.
Its principal activities include the development and operations of the Port of Tanjung Langsat and rental of storage tanks for petroleum and its derivatives.
The port is a key infrastructure in the development of the adjoining Tanjung Langsat Industrial Complex as a petroleum and petrochemical hub to attract investors to Johor.