Moody's Investors Service has assigned Baa2 foreign currency and local currency issuer ratings to Malaysia International Shipping Corporation Berhad
(MISC). The outlook for the ratings is stable. The ratings of MISC are assigned on a stand-alone basis.
Moody's ratings reflect the strong and stable cash flow of MISC derived from long-term contracts.
The long-term nature of these contracts ensures MISC a stable revenue stream. Moody's recognises that the LNG shipping contracts of MISC for MLNG and MLNG2 are long-term contracts on a "take-or-pay" basis.
Moody's further expects MISC to enter into similar long-term "take-or-pay" contracts for MLNG3.
The inherently highly profitable LNG business, which reflects high demand for LNG, in Moody's opinion, is likely to persist for some time.
Moody's says that the ratings give considerable weight to the exclusive arrangement given by Petronas and its partners in MLNG and MLNG2 to MISC for shipping LNG and the contracts signed between MLNG/MLNG2 and MISC.
MISC is the sole transporter of LNG from Malaysia, supporting Malaysia's position as the world's third largest exporter of LNG.
Moody's also notes MISC owns a fleet of relatively young and well-maintained vessels.
The average age of MISC's fleet is lower than the industry average.
However, Moody's has expressed concern over MISC's potential increase in exposure in other non-LNG sectors of shipping, such as the container liner segment, which by nature is more cyclical and hence increases the level of operating and financial risks.
Moody's also notes that Petronas does not give preference to MISC for non-LNG businesses.
Moody's says that the ratings assigned are based on its understanding from MISC that while a substantial amount of debt has previously been borrowed at the subsidiary level, it is MISC's intention to incur future borrowings at the MISC level, and not at the subsidiary and/or project level.
Moody's expects that the existing borrowings at the subsidiary level (including the borrowings from COFACE) will be largely amortised over the next few years and will not be extended or renewed.
MISC was founded in 1968 and is headquartered in Kuala Lumpur, Malaysia. MISC is currently 62.4% owned by Petroliam Nasional Berhad
With a fleet of 124 vessels, and a total capacity of 4.7 million dwt, MISC is an important shipping and logistics services provider in Malaysia.
It is also the single largest owner-operator of LNG tankers in the world.
MISC offers a diversified and integrated range of maritime transportation services including LNG, Petroleum, Chemical, Container Liner and Integrated Logistics, and Dry Bulk. - (Reuters)