The impact from the recent coronavirus outbreak and the ensuing MCO has created a challenging environment for the toll road sector. — Bernama
KUALA LUMPUR: Malaysian Rating Corporation (MARC) sees major revenue losses across MARC-rated highway operators since the movement control order (MCO) was imposed from March 18.The rating agency said today the impact from the recent coronavirus outbreak and the ensuing MCO have created a challenging environment for the toll road sector.
“Nonetheless, with existing cash balance of RM3.1bil as at March 31,2020, Projek Lebuhraya Usahasama Bhd (PLUS) would still be able to support its liquidity position in the near term, ” it said.
MARC had on Friday extended its MARCWatch Developing placement on PLUS’ RM23.35bil Sukuk Musharakah programme.
This rating action follows from the initial rating action in January 2020 which placed PLUS’ sukuk programme on watch.
The sukuk programme carried a AAAIS/Stable rating prior to the MARCWatch placement which was precipitated by a government announcement to reduce toll rates by 18% on PLUS-owned highways and concurrently freeze toll hikes throughout its concession period without any government compensation.
In lieu of these measures, PLUS’ concession is expected to be extended by 20 years, to end-2058 from end-2038.
MARC said it came to understand that PLUS and the government were in negotiations to iron out the details stemming from the announcement and thereon address the implications on the toll concessionaire’s revenue and cash flows.
It opines that both parties will seek to reach an optimum and balanced outcome for all stakeholders which could involve a restructuring of PLUS’ sukuk.
“Nonetheless, the change in the government administration in February 2020 has meant that the time taken to conclude the negotiations would be longer than had been initially anticipated.
“MARC’s extension of the developing placement therefore continues to reflect the pending outcome of the negotiations with the government.
“Until the toll restructuring is complete, the existing concession agreements and supplemental concession agreements will continue to subsist and remain in full force, ” it said.
MARC said the 18% toll cut is applicable to vehicles in Class 1 (passenger cars), Class 4 (taxis) and Class 5 (buses) effective Feb 1,2020.
MARC’s assessment indicates no pressure on PLUS’ debt-servicing ability in the immediate term, although the longer-term implications on the company’s credit metrics are subject to the outcome of the negotiations with the government.
The amount outstanding under PLUS’ rated Sukuk Musharakah programme is currently at RM18.4bil, following the principal repayment of RM500mil on Jan 10,2020.
MARC said it will resolve the MARCWatch placement upon assessment of the outcome of PLUS’ negotiations with the government and the company’s plans arising from the changes in the toll rates and concession period.
PLUS is the toll concessionaire of five highways in Malaysia. They are the North-South Expressway (NSE), New Klang Valley Expressway, North-South Expressway Central Link, Malaysia-Singapore Second Link, Butterworth-Kulim Expressway and Penang Bridge.
Of these, the 771-km NSE remains its key highway in terms of revenue contribution, generating more than two-thirds of total toll revenue
