IPO delay has no immediate impact on Malakoff Power debt ratings: MARC

by **Cals** Wed 12 Mar 2014, 08:25

[size=33]IPO delay has no immediate impact on Malakoff Power debt ratings: MARC[/size]

Posted on 12 March 2014 - 05:37am

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[size=14]PETALING JAYA: The delay in the planned initial public offering (IPO) by Malakoff Corp Bhd will have no immediate impact on the debt ratings on its subsidiary Malakoff Power Bhd's RM5.4 billion sukuk murabahah and RM300 million Islamic commercial papers (ICP) programme, said the local credit rating agency Malaysian Rating Corp Bhd (MARC).

In a press statement yesterday, MARC said it kept the 'AA-IS/Stable' and 'MARC-1 IS/Stable' ratings unchanged on Malakoff Power's sukuk murabahah and ICP programme.

The ratings, which were assigned on Dec 4, 2013, had anticipated Malakoff's planned IPO on Bursa Malaysia by first half of this year, with proceeds raised from the exercise to mainly fund the early redemption of Malakoff's RM1.8 billion unrated junior sukuk due in 2042.

"MARC views the IPO deferment would not have an immediate impact on the group's financial metrics so long as the new listing date provides sufficient buffer for timely implementation of Malakoff's refinancing exercise," it said.

Reuters last week reported that MMC Corp Bhd is expected to defer the US$1 billion Malakoff Bhd IPO to 2015, quoting sources with knowledge of the deal. MMC Corp is yet to comment on the report.

The rating agency will continue to monitor the developments on Malakoff's IPO progress and will take appropriate rating action if further elements of uncertainty are introduced into the group's risk profile.

MARC however cautioned that the deferment of the planned IPO would result in a delay in the junior sukuk's early redemption date.

"While the additional financing costs are expected to be met with available cash allocated for dividend payments from Malakoff to its wider base of shareholders post IPO, MARC is mindful of the potential impact from any prolonged delay of the IPO plan on Malakoff's ability to refinance its RM1.3 billion equity bridging loan (EBL)," it said.

The EBL, which will mature in 2017, is provided to its wholly-owned subsidiary Tanjung Bin Energy Issuer Sdn Bhd.

Meanwhile, MARC also reiterated its earlier view that the completion of the IPO is key to improving the group's capital structure which in turn would support its refinancing exercise of the EBL.

As Tanjung Bin Power Sdn Bhd, the concessionaire for the 3 x 700-megawatt coal-fired power plant in Tanjung Bin, Johor, is the main cash flow contributor to Malakoff Group and the main catalyst for Malakoff's IPO plan, the success of its major maintenance plan commenced in July 2013 is critical towards maintaining the current ratings, said MARC.

Based on the latest update, the power plant has returned to normal operations, while the third and final generating unit to undergo major maintenance works completed its capacity testing on March 7, 2014.
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