MARC is releasing this update on its toll concessionaire-related ratings to highlight its actions following recent developments in the domestic toll road sector. Its last rating action on the toll road sector was on August 30, 2018 when the rating agency removed its MARCWatch Developing on the sector to reflect the substantial abatement of risk from any immediate resolution to the tolling issue. Concurrently, a negative outlook was attached to the sector to reflect the prevailing regulatory uncertainty as the government considers various options to resolve the issue.

Since that rating action, MARC has noted that there has been no interference in the toll concessionaires’ operations and that the government has continued to meet its obligations in providing compensation in lieu of allowing scheduled toll hikes to date. In view of these factors, the rating agency has reviewed its stance on the sector and is assessing the toll concessionaires in its universe on a case-by-case basis, revising or maintaining the outlook accordingly. For matured toll concessionaires with demonstrated ability to generate sufficient cash flows and maintain healthy cash balance levels to meet their financial obligations, MARC views these toll concessionaires to be in a stronger position to withstand shifts in the prevailing regulatory environment. In this respect, the rating agency has revised the rating outlook on three of its ten toll road concessionaires from negative to stable.

Conversely, toll concessionaires which are in the construction phase and/or are reliant on timely government cash compensation in the absence of periodic implementation of toll hikes would remain more susceptible to regulatory action. In this regard MARC has maintained the ratings outlook of three of its toll road concessionaires at negative.

In its most recent action on March 27, 2019, the outlook of Sistem Penyuraian Trafik KL Barat (SPRINT) was revised to developing in view of the uncertain outcome of negotiations between the government and SPRINT’s major shareholder for the former to acquire the toll concessionaire along with the major shareholder’s other highway concession assets. For other toll road concessionaires in its universe, the rating agency is currently assessing their credit profiles. These actions notwithstanding, MARC will continue to monitor and respond accordingly if there is an impact on its toll concessionaires-related ratings from further developments in the toll road sector.

The list of MARC rating actions on its toll concessionaires to date is provided below:

Toll concessionaire	Issue	Rating	Outlook	Date
Lebuhraya Duke Fasa 3 Sdn Bhd	RM3.64 billion in nominal value Sukuk Wakalah	AA-IS	Negative	November 14, 2018
Projek Lintasan Sungai Besi-Ulu Klang Sdn Bhd	RM2.0 billion Sukuk Wakalah Programme   RM500.0 million Danajamin-Guaranteed Facilities	A+IS(s)     AAAIS(fg)	Negative     Stable	December 13, 2018     December 13, 2018
ANIH Bhd	RM2.5 billion Senior Sukuk Musharakah Programme	AAIS	Stable	February 7, 2019
Konsortium Lebuhraya Utara-Timur (KL) Sdn Bhd	RM2.3 billion IMTN Programme (Sukuk Musharakah)   RM180.0 million Redeemable Secured Junior Bonds	AA-IS       A-	Negative       Negative	February 19, 2019       February 19, 2019
Cerah Sama Sdn Bhd	RM750.0 million in nominal value IMTN (Sukuk) Programme	AA-IS	Stable	February 21, 2019
Projek Lebuhraya Usahasama Bhd	RM23.35 billion Sukuk Musharakah Programme	AAAIS	Stable	March 25, 2019
Sistem Penyuraian Trafik KL Barat Sdn Bhd	RM510.0 million BaIDS	A+IS	Developing	March 27, 2019
Grand Sepadu (NK) Sdn Bhd	RM210.0 million Sukuk Murabahah	AA-IS	Negative	Under review
Senai-Desaru Expressway Bhd	RM1.89 billion IMTN Programme	BBB-IS	Negative	Under review
MEX II Sdn Bhd	RM1.30 billion Sukuk Murabahah Programme   RM150.0 million Junior Bonds	AA-IS     A-	Negative     Negative	Under review     Under review

Contacts:
David Lee, +603-2717 2955/ david@marc.com.my;
Rajan Paramesran, +603-2717 2933/ rajan@marc.com.my