KUALA LUMPUR, May 18 – RAM Ratings expects RM53bil of bonds and Sukuk issued by toll road concessionaires to be affected if the new federal government abolishes highway tolls.
It said on Friday while the government has indicated that it will uphold the terms of the concessions in implementing the proposal, the terms of a settlement in the event of expropriation differ for each concession agreement.
“Pending further details, RAM believes that the government will balance its plan against any implications to the bond market,” it said.
RAM Rating said the toll-road sector is one of the earliest and largest sectors in Malaysia to have tapped the debt capital markets.
As at May 15, 2018, the sector comprised 23 issuers, with a notable RM52.83bil of bonds and Sukuk (excluding loan stocks) outstanding (RM39.79bil of which are rated).
These are largely held by local institutional investors and government-linked pension funds.
RAM’s co-head of infrastructure and utilities ratings Chong Van Nee said cashflow matching is a key rating driver for toll-road concessionaires.
“As concession terms are not uniform across the sector, the issue rating for each toll road would have to be assessed on a case-by-case basis, with an emphasis on the timing of and the eventual payment amount from the government, weighed against the financial obligations of the concessionaires,” Chong said.
In the interim, if tariffs are not implemented as per the toll-rate schedule in the concession agreements, the government has to compensate concessionaires, as has happened in the past.
The previous government allocated RM448mil in Budget 2018 to compensate the toll concessionaires, said RAM.