MARC has downgraded its ratings on MEX II Sdn Bhd’s (MEX II) RM1.3 billion Sukuk Murabahah Programme to BBIS from BBBIS, and RM150.0 million Junior Bonds to B from BB. The ratings remain on MARCWatch Negative.
Our rating actions are premised on the increasing likelihood that MEX II may not be able to put in place a liquidity facility that it had originally expected to procure by end-2020 to meet a principal and profit payment of RM68.7 million due in April 2021. We understand that MEX II is continuing with negotiations to seek financial assistance; however, we note that its liquidity has deteriorated to an extent that has heightened the default risk without external cash support or maturity extensions. In addition, MEX II has RM38.2 million due in October 2021 while cash in its Finance Service Reserve Account stood at RM7.7 million.
We view that given the minimal liquidity headroom, the company’s viability rests on a successful restructuring of the Sukuk Murabahah, through which additional funding will be sought to complete the stalled 16.8-km Lebuhraya Putrajaya-KLIA highway project (MEX Extension). While discussions about the restructuring are ongoing, how and when the negotiations will conclude are uncertain at this juncture. The current economic environment has compounded the challenges MEX II faces.
In the circumstances, the absence of progress in obtaining a bridge facility in the coming months will result in further downgrades. Going forward, in the event a refinancing is successfully completed, we will reassess MEX II’s restructured profile and assign a new rating consistent with our assessment of the company’s capital structure, risk profile and prospects post-restructuring.