RAM Ratings: Maxis Broadband's new MYR 10 billion Sukuk neutral on BGSM Management's issue rating.
RAM Ratings is of the view that the recently announced Unrated Sukuk Murabahahh Programme (New Sukuk) with a nominal value of up to MYR 10 billion over a tenure of up to 30 years by Maxis Broadband Sdn Bhd - a subsidiary of Maxis Berhad (Maxis) - is so far credit neutral on the AA3/Stable rating of BGSM Management Sdn Bhd's (BGSM Management or the Group) existing IMTN Programme of up to MYR 10 billion in nominal value (2013/2043).
Pursuant to Maxis' recent internal reorganisation exercise, Maxis Broadband intends to utilise the proceeds of the New Sukuk to part finance the purchase consideration of the businesses and undertakings, including relevant assets and liabilities from Maxis' other wholly-owned subsidiaries, capital expenditure, working capital requirements and/or other general funding requirements and general corporate purposes as well as refinancing of other debt/ financing obligations and any maturing Sukuk under the New Sukuk Programme. Ultimately, BGSM Management's cumulative debts are expected to remain unchanged and hence the above is not expected to have any material impact on the gearing of Maxis.
In the broader context, RAM does not discount the possibility of additional capex and working capital, pending further details on spectrum assignment fees by the Malaysian Communications and Multimedia Commission. RAM will reassess the full financial impact on BGSM Management when this information is made available.
Maxis is the sole subsidiary of BGSM Management and also the latter's key source of cashflow. Maxis' debt load has been increasing through the years on the back of its hefty capex requirements and dividend payouts. As at end-March 2016, Maxis' gearing ratio stood at 2.10 times while the combined debts of Maxis and BGSM Management came up to MYR 15 billion. As such, further aggressive leveraging by Maxis could reduce its ability to support the Group's credit metrics.
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