[RAM] RAM Ratings affirms Amanat Lebuhraya Rakyat's AAA rating

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 expectations that ALR will continue to maintain robust debt coverage ratios throughout the tenure of the Sukuk. The AAA rating remains backed by ALR’s diversified earnings profile from its portfolio of four strategically aligned highways – the Damansara-Puchong Expressway (LDP), Shah Alam Expressway (KESAS), SPRINT Expressway and the SMART Tunnel (collectively, the Four Highways) – which are mature and deemed to face lower demand risks. These factors are complemented by the transaction’s financing structure and restrictive covenants which prohibit distributions to the Issuer’s shareholders and further indebtedness. 

The aggregate average daily traffic (ADT) of the Four Highways grew to 997,515 vehicles in the first eight months of CY2024. This was within expectations, with the outperformance of the SPRINT Expressway balancing the traffic weakness of the LDP and the SMART tunnel. ALR’s operational expenses were lower than projected, thanks to prudent cost and cash management. 

RAM’s rating affirmation considers slightly lower projected ADT for LDP and SMART, balanced by some improvement in the SPRINT’s traffic. We have also assumed ALR’s cost will be within permissible limits under the covenants imposed. Overall, the Issuer is expected to register a minimum finance service coverage ratio (FSCR) (with cash balances) of 2.28 times throughout the tenure of the Sukuk, commensurate with the AAA rating. Any blips in FSCRs, though unlikely, due to pending tax refunds are deemed temporary.

As with other highway transactions, ALR remains exposed to the sector’s regulatory and political uncertainties. The risk of concession termination and expropriation due to non-performance of the concession terms is deemed low, given the established track record of the Four Highways, while force majeure risk is remote owing to the well-diversified portfolio of highways underlying the transaction.

ALR was incorporated on 13 December 2021 for the sole purpose of acquiring and holding the four concession companies which own the highways. While ALR was incorporated under the Companies Act, its shareholders are not profit motivated, consisting of five distinguished individuals who are also board members. ALR’s board members (and shareholders) are responsible for ensuring road safety, eliminating government compensation for non-revision of toll rates, maintaining toll affordability, and returning the Four Highways to the government once ALR’s debts are repaid. With equity and shareholder distributions prohibited, the Issuer can accumulate significant cash from any outperformance. To mitigate negative carry risk, ALR may redeem its longer-dated sukuk tranches early through an embedded transaction call provision.
 

Analytical contacts
Karin Koh, CFA
(603) 3385 2508
karin@ram.com.my

Davinder Kaur Gill
(603) 3385 2525
davinder@ram.com.my

Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my