"The traffic growth of SDEB's sole toll concession asset, Senai-Pasir Gudang-Desaru Expressway (E22), has remained flat with daily traffic for the first five months of 2013 averaging 590,464 passenger car unit-kilometres (pcu-km) (2012: 587,163 pcu-km), which confiMYR s the rating agency's view that spillover traffic into E22 from the congested Pasir Gudang Highway has yet to materialise.
"Since MARC's last rating action in February 2013, the legal action taken by the toll road contractor, Ranhill Engineers and Construction Sdn Bhd (REC), to recover construction cost overruns from SDEB remains unresolved.
"During the first nine months of the financial year ended June 2013, SDEB's operating loss widened to MYR 27.7 million from MYR 17.3 million in 1HFY2013.
The rating action reflects slower-than-expected progress in SDEB's proposed debt restructuring to address the severe traffic underperformance experienced by the company's sole toll concession asset, the Senai-Pasir Gudang-Desaru Expressway (E22).
SDEB has refuted REC's claims through its lawyers, however, MARC cautions that any payout of claims may further exacerbate the company's already weakened financial position and complicate restructuring efforts.
Based on SDEB's cash balances of MYR 25.5 million as at December 31, 2012 and cash flow from operations (CFO) of MYR 12.2 million during the six-month period ending December 31, 2012 (6MFY2013), MARC expects SDEB's cash flow to be insufficient to service the rated Sukuk beyond 2013.