RAM Ratings has affirmed the AAA/Stable rating of Amanat Lebuhraya Rakyat Berhad’s (ALR or the Issuer) RM5.5 bil Senior Sukuk Programme (2022/2044) (the Sukuk).
The affirmation reflects ALR’s superior ability to meet its profit and principal obligations under the Sukuk, backed by its portfolio of four strategically aligned highways. The stressed projections assume slightly higher average daily traffic (ADT) in the coming year, balanced by heftier costs. The Ratings agency also assumes a tax refund from the Inland Revenue Board to be delayed to September 2024. Accordingly, the cash flow and cash accretion of the four highways are anticipated to support the Issuer’s steady debt servicing ability, translating into respective minimum and average finance service coverage ratios of 2.25 times and 5.19 times (with cash balances) throughout the tenure of the Sukuk (base case: 2.95 times and 11.58 times, respectively). These levels are commensurate with an AAA-rated transaction.
Save for the SMART tunnel, the highways’ traffic volumes returned to pre-pandemic levels in 1H 2023. Accordinng to RAM the aggregate ADT of the four highways leapt 39.7% y-o-y last year to 898,889 vehicles, rising another 10.0% in the first eight months of 2023 (8M 2023) to 965,849. This is largely within RAM’s expectations, excluding the festive months of January and April 2023.
ALR’s operational expenses in the initial months of the transaction were higher than anticipated, due in part to highway-related expenses incurred after the expressways were acquired (i.e., pavement cost) and staff bonuses. Actual costs for 8M 2023 were within the projected range. On balance, the transaction’s deferred equity in the form of a RM60 mil deferred consideration owed by ALR to the vendor of the Shah Alam Expressway (KESAS) – which has yet to be paid out – helped shore up the transaction’s liquidity.
ALR was incorporated on 13 December 2021 for the sole purpose of acquiring and holding the four concession companies which own the highways – Damansara-Puchong Expressway, KESAS, SPRINT Expressway and SMART Tunnel.
Subsequent to the completion of the acquisitions on 13 October 2022, the concession companies are wholly owned by the Issuer. Of note, ALR’s shareholders are not profit motivated, while its charter and mandate require the Issuer to ensure the toll rates of highways that it acquires are affordable, settle the debts of the acquired entities and return the highway assets to the government in the shortest possible timeframe.