Malaysian Rating Corp Bhd (MARC) has downgraded the ratings of Tanjung Langsat Port Sdn Bhd’s (TLP) RM250mil bonds and RM135mil debt notes while the outlook on the ratings remains negative.
The rating action reflects TLP’s continued losses and weak cash flow arising from a delay in the commencement of TLP’s port operations which 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 cash flow 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.
While TLP has undertaken several initiatives to generate stronger core income, including capital dredging works to deepen the port’s draft, the port operator is expected to rely on land sales or further financial support from parent company Johor Corporation (JCorp) to meet its upcoming RM20 million repayment in July 2013 as these efforts will not be sufficient to improve overall cash flow significantly in the short-term.
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Press Release, November 14, 2012