MARC Ratings has assigned a preliminary AA-IS rating with a positive outlook to Konsortium Lebuhraya Utara–Timur (KL) Sdn Bhd’s (Kesturi) proposed Sukuk Murabahah Programme of up to RM2.3 billion (Proposed New Sukuk).
The Proposed New Sukuk will be used to refinance Kesturi’s existing Senior Sukuk and Junior Bonds. Under the proposed transaction, CIMB Investment Bank Berhad, as the sole arranger, will acquire the existing financing from current holders and subscribe to RM2.15 billion in nominal value of the Proposed New Sukuk. The ratings on the existing financing will be withdrawn upon its cancellation.
The refinancing is expected to enhance Kesturi’s financial flexibility by extending the debt repayment profile, reducing annual principal obligations and lowering the minimum finance service coverage ratio (FSCR) covenant to 1.25x, while maintaining the post-distribution threshold at 1.50x. Completion of the transaction is targeted by end-December 2026.
The rating reflects Kesturi’s mature toll road operations, supported by the established traffic profile and proven cash flow generation of the Duta–Ulu Kelang Expressway Phases 1 and 2 (DUKE 1 and DUKE 2). The Proposed New Sukuk is expected to materially strengthen Kesturi’s debt-servicing profile through a longer repayment tenure and more sustainable amortisation schedule. The sukuk will be fully amortised by FY2047, providing a 12-year tail before concession expiry in August 2059, excluding the 10-year extension option. These strengths are moderated by elevated leverage and the risk of delays in receiving government compensation for deferred toll hikes. The expected improvement in Kesturi’s credit profile under the proposed refinancing supports the Positive outlook.
Traffic performance remained resilient in FY2026, with aggregate annual average daily traffic increasing by 2.2% y-o-y to 241,061 vehicles. Revenue rose by 30.2% to RM365.2 million, driven by higher government compensation and continued traffic growth. Toll revenue increased by 2.8% to RM219.7 million, while government compensation more than doubled to RM145.5 million, largely reflecting compensation for the deferred 2024 tariff increase.
Debt-servicing capacity is assessed as strong. Under the base case, minimum and average pre-distribution FSCR with cash are projected at 2.69x and 3.94x, respectively, comfortably above the proposed 1.25x covenant threshold. Under MARC Ratings’ sensitised case which assumes zero traffic growth throughout the sukuk tenure, minimum and average FSCR remain robust at 2.59x and 3.40x, respectively. Coverage metrics also provide headroom for planned shareholder distributions, with post-distribution FSCR expected to remain above 1.50x.
Kesturi’s leverage remains elevated, although it improved to 3.6x as at end-June 2026 from 6.0x a year earlier. Total borrowings are expected to rise to approximately RM2.15 billion following the refinancing and remain broadly stable until amortisation commences. Consequently, the higher debt burden and extended deleveraging period partly offset the benefits of the strengthened financing structure.