Malaysian Rating Corp Bhd (MARC) has placed Projek Lebuhraya Usahasama Bhd’s (PLUS) RM23.35 billion sukuk musharakah programme on the rating agency’s MARCWatch developing list due to the material development at the toll road operator.
The rating agency said the placement follows the government’s recent announcement that PLUS aims to reduce the toll burden on road users and relieve the government’s compensation pressures.
However, the rating agency stated that in achieving the objectives, it is necessary to modify PLUS’ concession agreements, including a proposed extension of the concession period to meet the cashflow requirements.
“MARC understands negotiations have already commenced with the government to reach an optimum and balanced outcome for all stakeholders. MARC wishes to highlight the amount outstanding under its rated sukuk musharakah programme currently stands at RM18.4 billion, following the recent principal repayment of RM500 million on Jan 10, 2020,” MARC noted in a statement last Friday.
MARC added that it will continue to look at the interdependence between default events for the rated sukuk and the RM11 billion government-guaranteed sukuk that matures after the rated programme as credit positive.
MARC had rated PLUS’ sukuk at AAAIS, incorporating a two-notch rating uplift from PLUS’ standalone rating that reflected the agency’s assessment of a very high likelihood of government support to the company.
MARC said it will conduct appropriate rating action as necessary when there is more clarity on the outcome of the recent changes.
Putrajaya recently revealed that PLUS’ shareholding structure remains unchanged with Khazanah Nasional Bhd through UEM Group Bhd, and the Employees’ Provident Fund will maintain 51% and 49% interest respectively following bids from various parties to buy the business.
The concessionaire will also be given a 20-year extension until 2058 to compensate for an 18% toll reduction and a freeze on toll hikes.
“The 18% toll cut for private vehicle users alone could push the concessionaire’s annual revenue lower by about RM500 million on average, but our assessment indicates no pressure on PLUS’ debt-servicing ability in the immediate term, assuming all else remains equal. However, specifics on the application of the toll discount and longerterm implications on PLUS’ credit metrics are matters expected to be the subject of further discussions with the government over the next three to six months,” MARC said.
PLUS is the toll concessionaire of five highways in Malaysia comprising the North-South Expressway (NSE), New Klang Valley Expressway, North-South Expressway Central Link, Malaysia-Singapore Second Link, Butterworth-Kulim Expressway and the Penang Bridge.
Of these, the 772km NSE remains its main highway asset in terms of revenue contribution, generating around two-thirds of the total toll revenue of RM2.9 billion for the first nine months of 2019.
Source The Malaysian Reserve