KUALA LUMPUR: RAM Ratings has reaffirmed the ratings of the RM93 million Sukuk Ijarah and RM50 million Sukuk Ijarah Commercial Paper/Medium-Term Note (“CP/MTN”) Programme (collectively known as “the Islamic Debt Securities”) issued by Midas Plantation Sdn Bhd (“Midas”).
Midas is a special-purpose company that had been incorporated as the financing company for an Islamic sale-and-leaseback transaction backed by oil-palm plantation assets. Under the transaction, RH Plantation Sdn Bhd and Timrest Sdn Bhd – collectively known as “the Lessees” - had sold their beneficial interests in 2 oil-palm plantations and a palm-oil mill (collectively known as “the Assets”) to Midas.
To date, the Lessees have made timely and adequate payments on their lease obligations to Midas. RAM Ratings expects Midas to maintain its ability to meet the semi-annual payments on the Sukuk Ijarah.
The reaffirmation of the respective ratings of AAA, AA2, A2 and A3 for Class A, Class B, Class C and Class D of the RM93 million Sukuk Ijarah is premised on the sustained cashflow from the Assets which, while slightly below expectations, continue to support their valuations.
RAM Ratings notes that Midas has met all its financial commitments under the Islamic Debt Securities, and that the transaction has been performing according to schedule.
As mentioned, the performance of the 2 oil-palm plantations has been below expectations. Lower yields of fresh fruit brunches can mainly be attributed to labour shortage, exacerbated by the rainy season that had prevented manuring and harvesting work.
Although the price of crude palm oil has been hovering around RM2,500-RM2,600 per metric tonne, the benefits have been offset by rising production costs - a situation also faced by other plantation players.
Meanwhile, the ratings of the RM50 million Sukuk Ijarah CP/MTN Programme reflect their enhancement in the form of a Sukuk Put Option, granted by OCBC Bank (Malaysia) Berhad (“OCBC”) to the Sukuk holders.
RAM Ratings reaffirmed OCBC’s AA1/P1 general bank ratings, with a stable outlook, in April 2007. Midas fully repaid the outstanding issues from its RM50 million Sukuk Ijarah CP/MTN Programme on 27 June 2007.
RAM Ratings has been informed that the management has no immediate plans to re-utilise this debt facility.