KUALA LUMPUR: RAM Ratings (RAM) expects bonds and sukuk issued by toll road concessionaires to be affected by the new administration's intention to abolish the imposition of highway tolls.
The rating agency said while the government has indicated that it would uphold the terms of the concessions in implementing the proposal, the settlement terms in the event of expropriation differ for each concession agreement.
"Pending further details, we believe the government will balance its plan against any implications to the bond market," it said in a statement today.
The toll-road sector was one of the earliest and largest sectors in Malaysia tapping into the debt capital markets. As at May 15, 2018, the sector comprised 23 issuers, with a notable RM52.83 billion of bonds and sukuk (excluding loan stocks) outstanding (RM39.79 billion of which are rated).
RAM said toll-road sector bonds and sukuk are largely held by local institutional investors and government-linked pension funds.
"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 will be assessed on a case-by-case basis.
"The assessment will also be made with an emphasis on the timing of and the eventual payment amount from the government, weighed against the financial obligations of the concessionaires," said RAM Infrastructure and Utilities Ratings Co-Head Chong Van Nee.
In the interim, RAM said if tariffs are not implemented as per the toll-rate schedule in the concession agreements, the government would be obligated to compensate concessionaires, as has happened in the past.