MARC has extended its MARCWatch Developing placement on Projek Lebuhraya Usahasama Berhad’s (PLUS) RM23.35 billion Sukuk Musharakah Programme. This rating action follows from the previous rating actions in January and April 2020. The MARCWatch extension continues to reflect the pending outcome of the ongoing negotiations on toll restructuring between the toll concessionaire and the government.
The negotiations are expected to address the implications from the 18% toll reduction effective February 1, 2020 on the toll concessionaire’s revenue and cash flows, which could involve an extension of concession period and a restructuring of PLUS’ sukuk. At this juncture, several options have been discussed but no decision has been made as negotiations have been delayed due to the change in the government administration in February 2020 and imposition of the movement control order. Until the toll restructuring is completed, the existing concession agreements and supplemental concession agreements will continue to subsist and remain in full force.
MARC’s assessment indicates no pressure on PLUS’ debt-servicing ability in the immediate term, although longer-term implications on the company’s credit metrics are subject to the outcome of negotiations with the government. The amount outstanding under PLUS’ rated Sukuk Musharakah programme currently stands at RM18.4 billion. The company also has over RM3 billion in cash as at June 30, 2020, which is sufficient to meet its profit and principal payments due in 2021. The next principal payment of RM500 million will be due in January 2021. The sukuk programme carried a AAAIS/Stable rating prior to the MARCWatch placement.
The rating agency will resolve the MARCWatch placement upon assessment of the outcome of PLUS’ negotiations with the government regarding the toll restructuring and related matters, which is expected by 4Q2020.