[RAM] RAM Ratings extends Negative Rating Watch on Sepangar

RAM Ratings has extended the Negative Rating Watch on the AA₁ rating of Sepangar Bay Power Corporation Sdn Bhd’s (Sepangar or the Company) RM575 mil Nominal Value Sukuk Murabahah (the Sukuk).

The Sukuk was first placed on Negative Rating Watch in October 2024 following an unexpected and large depletion of Sepangar’s cash reserves in 2023 which caused its minimum projected finance service coverage ratio (FSCR) to drop to 1.33 times, below the 1.80 times for the rating threshold.

As at 3 January 2025, cash reserves were replenished to RM50.5 mil (against our earlier expectation of RM35.8 mil), successfully meeting the required minimum FSRA balance then. However, we expect the Company to register a still-low FSCR of 1.45 times in July 2025 and it may be unable to fulfil the minimum finance service reserve account (FSRA) requirement due in January 2026. All said, Sepangar should still be able to fully meet its outstanding Sukuk obligations, albeit with a sufficient but weaker cashflow coverage compared to initial expectations. As at 18 April 2025, cash balances stood at an improved RM55.8 mil.

The rating watch will be lifted if the refinancing of the Sukuk, which we understand to be at an advanced stage, is favourably concluded. Likewise, higher than forecast cash accumulation to fully meet the FSRA and FSCR levels commensurate with the rating will also resolve the Rating Watch. 

RAM’s Rating Watch highlights a possible change in an issuer’s debt rating. It focuses on identifiable events such as mergers, acquisitions, regulatory changes and operational developments that place a rated debt under RAM’s special surveillance. In a broader sense, the Rating Watch covers any event that may result in changes in risk factors relating to the repayment of principal and interest. 

Issues are put on Rating Watch when some of these events are expected to or have occurred. The Rating Watch, however, does not mean that the rating will inevitably be changed. It only means that RAM is evaluating the rating and a final affirmation is pending. A “positive” outlook indicates that a rating may be raised while a "negative" outlook indicates a possible downgrade. A “developing” outlook refers to unusual situations in which future events are so unclear that the rating may potentially be raised or lowered. 


Analytical contacts
Chew Chiang Lim
(603) 3385 2516
chianglim@ram.com.my

Chong Van Nee, CFA
(603) 3385 2482
vannee@ram.com.my