KUALA LUMPUR (April 21): MEX II Sdn Bhd has deferred coupon payment due on April 30, 2021 for the highway operator’s RM150 million junior bonds as the requisite conditions pursuant to the trust deed dated April 20, 2016 have yet to be fulfilled, according to facility agent CIMB Investment Bank Bhd.

MEX II is an operating entity of Maju Holdings Sdn Bhd, which also owns Maju Expressway Sdn Bhd (MESB) via wholly-owned subsidiary MEX I Capital Bhd.

MESB is the concessionaire of the 26km Maju Expressway in the Klang Valley, according to MESB’s website.

MEX II was set up to issue bonds, raising money to finance the proposed 18km Putrajaya-KLIA highway, according to MESB.

Yesterday, CIMB said in a filing with Bank Negara Malaysia’s (BNM) Fully Automated System for Issuing/Tendering (FAST) website that the investment bank had been notified by bond issuer MEX II that there will be no coupon payment on April 30, 2021.

"Accordingly, the coupon payment date has been deferred to the maturity date, i.e. April 27, 2035,” CIMB added.

CIMB did not specify in the filing the RM150 million junior bonds’ annual coupon or interest rate.

On March 26, Malaysian Rating Corp Bhd (MARC) analysts wrote in a note that it had downgraded MEX II's RM1.3 billion sukuk murabahah programme and RM150 million junior bonds ratings to CIS/C from BBIS and B respectively.

The analysts said the rating action was driven by the liquidity pressure MEX II was facing and the likelihood of missing an upcoming payment on its sukuk. 

"MEX II has a sukuk repayment of RM68.7 million due on April 29, 2021 against which it had a cash balance of RM7.7 million as at end-February 2021. It also has another RM38.2 million due in October 2021.

"The rating remains on MARCWatch Negative. If no payment is made on the upcoming financial obligation in April 2021, the ratings will be downgraded to D. In the event MEX II obtains an indulgence from sukukholders to defer the sukuk payment, the ratings will remain at CIS/C,” the analysts said.

According to them, MEX II has indicated that it is in discussions with financial institutions to obtain a bridge facility to meet repayment obligations, and with investors for a postponement of the April maturity to October 2021. 

While MEX II's viability may rest on a successful restructuring of the sukuk, through which additional funding will be sought to complete the stalled Putrajaya-KLIA highway project, the timing remains uncertain, they said.

On March 19, 2021, RAM Ratings analyst Yip Chee Meng wrote in a note that RAM had downgraded the rating of MEX I Capital’s RM1.35 billion sukuk musharakah  to C3/Negative, from BB1/Negative, premised on the company’s persistent liquidity problems and heightened default risk amid sharply lower traffic volumes along the Maju Expressway due to the Covid-19 pandemic-driven movement control order (MCO) in Malaysia.

Yip said the sukuk, which was issued in 2014, matures in 2031. The rating downgrade was also prompted by delays in concluding the planned refinancing exercise, according to him.

"The Covid-19 pandemic and resultant MCO slashed the average daily traffic of the Maju Expressway by 39.1% to only 88,970 vehicles in 2020 (2019: 145,987 vehicles). This in turn severely weakened the earnings and cash flow-generating ability of MESB, the concessionaire of Maju Expressway and the key cash flow source under the transaction.

"It also compounded MEX I Capital’s already weak liquidity position and credit metrics, thereby accelerating the potential default on the sukuk,” he said.