KUALA LUMPUR (Sept 10): Moody's Ratings has affirmed its A3 long-term issuer rating and baa3 Baseline Credit Assessment (BCA) for national sovereign wealth fund Khazanah Nasional Bhd, with a stable outlook.
The global rating agency also affirmed the A3 senior unsecured ratings on Khazanah's borrowings and programmes, including the US$10 billion (RM43.71 billion) guaranteed global medium-term note (MTN) programme of Khazanah Capital Ltd, the US$5 billion sukuk programme of Khazanah Global Sukuk Bhd, and trust certificates by its Labuan-incorporated special purpose vehicle Dua Capital Ltd.
"The rating affirmation with a stable outlook reflects our expectation that Khazanah will generate steady income from its investment portfolio, continue to adhere to conservative financial policies and maintain strong access to external funding," Moody's vice-president and senior credit officer Maisam Hasnain said in a statement on Tuesday.
"We also expect the government of Malaysia to remain an accommodating and supportive shareholder to Khazanah," Hasnain, who is also Moody's lead analyst for Khazanah, added.
The rating agency said the A3 issuer rating is also based on the expectation of a very high likelihood of extraordinary support from the Malaysian government whenever required.
This assumption is reflected by the Malaysian government's 100% ownership of Khazanah, with no plans to reduce this stake, the presence of government-guaranteed debt in Khazanah's capital structure, Khazanah's position as the country's sovereign wealth fund responsible for growing the nation's long-term wealth, Khazanah's role in supporting and implementing the government's socio-economic objectives, and the sovereign wealth fund's sizeable ownership stakes in strategic Malaysian assets across key sectors.
Meanwhile, Moody's does not expect Khazanah to provide financial support to Malaysia Aviation Group Bhd (MAG) beyond the RM3.6 billion pledged for 2021 to 2025.
Extra funding to investee companies could strain Khazanah's credit metrics and weaken its baa3 BCA, which is underpinned by the sovereign wealth fund's ownership in Malaysian corporates that have leading market positions and strong business profiles, track record of conservative financial policies with respect to investment and funding decisions, close coordination with the Malaysian government and government-owned entities, and strong access to external funding, it said.
Moody's noted that Khazanah's long-term strategic asset allocation target of lowering its geographic concentration risk while optimising returns will remain unchanged. Khazanah's domestic investments concentration, as pointed out by the credit rating agency, has decreased to 59% of its investment portfolio in 2023 from 74% in 2018.
However, Moody's estimates that Khazanah's internal cash sources will be insufficient to cover its projected cash uses, primarily due to scheduled debt maturities over the next 12 to 24 months, which include revolving credit facilities that get rolled over each year.
"Nonetheless, the company's strong access to external funding tempers its liquidity risk, as demonstrated by its recent issuance of US$1 billion in US dollar bonds and sukuk in August," it noted.