MARC Ratings has assigned a preliminary rating of AA+IS to Weststar Aviation Sdn Bhd’s (WAVI) proposed Islamic Medium-Term Notes Programme of up to RM6.0 billion. The rating outlook is stable.
The rating reflects strong and predictable cash flows from the Government of Malaysia under an 18-year concession administered by Majlis Keselamatan Negara (MKN), which includes a three-year helicopter delivery period. It also benefits from the established operating track record of WAVI’s parent, Weststar Aviation Services Sdn Bhd (WASSB), and the manufacturing and delivery capabilities of helicopter manufacturer Leonardo SpA (Leonardo). These strengths are moderated by execution risk during the helicopter delivery phase, stringent aircraft availability requirements and potential delays in concession receipts.
Under the concession, WAVI will supply and maintain 28 helicopters for six government agencies involved in Malaysia’s defence, security and emergency response operations. The concession also includes training for more than 1,440 pilots, crew and engineers. The helicopters will support essential peace operations, including utility missions, search and rescue, medical evacuation, security patrols and training.
The total project cost is estimated at about RM6.41 billion, comprising approximately RM5.76 billion in sukuk proceeds and RM640.5 million in shareholder equity. The sukuk will be issued progressively during the helicopter delivery period. The first issuance of about RM3.83 billion, expected in 2026, will be used to refinance existing syndicated facilities, partly reimburse eligible shareholder advances from WASSB and meet the remaining initial project requirements. WASSB will then draw on a separate revolving credit facility at its level to finance the remaining capex requirements in 2027 via shareholder financing/advances to WAVI, ahead of subsequent sukuk issuances. The subsequent sukuk issuances totalling about RM1.93 billion are expected in 2027 for WAVI to refinance WASSB’s shareholder financing/advances. WASSB will also provide an additional shareholder commitment of up to 10% of the total project cost to cover any cost overruns, payments of profit, fees and expenses related to the sukuk, backed by a revolving credit facility at WASSB’s level.
Debt servicing will be supported by fixed monthly concession payments for each helicopter, regardless of flight-hour utilisation, subject to stipulated availability requirements. Principal repayments are projected to commence in 2028, following the scheduled delivery of all 28 helicopters, and peak at about RM515 million annually between 2031 and 2035. Under the base case, the minimum and average finance service coverage ratios (FSCRs), including cash balances, are projected at 2.61x and 3.59x, respectively, over FY2028 to FY2039, comfortably above the minimum requirement of 1.65x. FY2028 is the first contractual FSCR testing year. Debt protection is further supported by a six-month Finance Service Reserve Account, which may be maintained through project cash, an Islamic bank guarantee (BG-i) or a combination of both, while distributions are subject to a minimum post-distribution FSCR of 1.75x.
Execution risk is viewed as manageable. All 28 helicopters are scheduled to be delivered by December 2027, within the concession’s 36-month delivery period ending in June 2028. The first helicopter for Jabatan Perdana Menteri was formally delivered on 15 October 2026, followed by the first of two helicopters for Jabatan Bomba dan Penyelamat Malaysia (BOMBA) on 1 November 2026. The second BOMBA helicopter is scheduled for delivery in December 2026, with the remaining 25 helicopters expected to be delivered progressively between January and December 2027, six months ahead of the delivery timeline as stated in the concession. Execution risk is moderated by Leonardo’s established manufacturing and delivery track record and longstanding relationship with WASSB.
Concession termination risk is viewed as low given the operational importance of the helicopters to the government agencies. The concession also provides financial protection to WAVI under key termination scenarios, including settlement of outstanding invoices and, where applicable, purchase of the affected aircraft by the government. These provisions provide some protection against potential losses, although the extent of recovery depends on the cause of termination and the applicable compensation arrangements.
MARC Ratings’ sensitivity analysis indicates adequate debt-servicing capacity under the stresses considered. Minimum FSCR remains above the 1.65x requirement under stressed scenarios covering delays in helicopter deliveries and concession receipts, as well as lower aircraft availability. Delivery delays have a greater impact on coverage than lower aircraft availability or delayed concession receipts, with a six-month delivery delay reducing minimum FSCR to 1.67x in FY2028, marginally above the covenant requirement.