PETALING JAYA: Amanat Lebuhraya Rakyat Bhd’s (ALR) shareholders will not be entitled to dividends, and thus, would be able to accelerate the full repayment of debt financing and return the highway concessions to the government in a timely manner, according to a statement from ALR.
The company pointed out that its shareholders did not require any equity return, and there would be no need to prolong the highways’ concession period once all of ALR’s debts have been fully repaid.
“Notably, as the existing vendors of the concession companies are commercial entities in nature, such a non-profit orientation is not viable under the current ownership structure. Hence, the proposal is for ALR to acquire the concession companies,” said ALR.
Also, ALR will minimise its cost of capital through the reliance on debt funding.
The company noted that without the need to pay dividends to shareholders, the concession companies’ cashflows (after meeting operational needs) can be fully channelled towards supporting any debt financing obligations.
“Given such a dedicated cashflow profile, ALR is anticipated to receive a strong credit rating, allowing us to tap the capital markets to fund the acquisition (which includes the repayment of existing debts),” said the company, which has appointed a consortium of banks to help with its sukuk (Islamic bonds) issuance.
ALR also said it was not seeking the government’s financial assistance to guarantee its sukuk.
The company pointed out that its proposal was unique, as it aimed to minimise the length of the concession extension required.
“ALR will return the highway concessions to the government once all its debts are fully repaid,” said the company, adding that an independent traffic consultant had assessed expected traffic projections which took into consideration the economy, pandemic effect, future developments as well as competing roads and alternative transportation.
In the statement, the shareholders and directors of ALR (Tan Sri Azlan Mohd Zainol, Datuk Idrose Mohamed, Datuk Soam Heng Choon, Datuk Dr Nirmala Menon, Datuk Mohamed Sharil Tarmizi) also clarified that “given their personal conviction and belief on the merits of the proposal, where the country and its citizens would stand to reap the benefits, they have voluntarily agreed to serve and assume such roles at ALR, which will act as the private sector intermediary to facilitate the transactions.”
They also noted that once the highway concessions are returned to the government, ALR is required to dedicate any residual surplus to the continuing maintenance of highways or to the improvement of urban mobility.
ALR has offered to acquire the concession companies related to four highways, namely, Kesas, LDP, Sprint and Smart for RM5.48bil.
The company pointed out that none of the employees of the concession companies “will be left behind in this acquisition”.
Under the proposed deal, toll rates would be maintained at the current rates without any need for government to pay compensation, and risk of future toll hikes.
ALR pointed out that in any typical toll restructuring, the concession tenure would need to be extended to compensate for the loss in revenue for the concession companies and for the full repayment to the sukuk holders.
“Without any restructuring, there are two potential scenarios as traffic volume continues to grow – either the government continues to pay the burgeoning toll compensation, or toll rates are increased. Neither scenario is desirable,” said ALR.
The company noted that today, users of the four highways are paying toll charges which are lower than what the concession companies are entitled to receive, with the difference being compensated by the government.
For example, in the case of Kesas (concession ends in August 2028), users are paying RM2 per Class 1 vehicle although the concession agreement prescribes a toll rate of RM3.
In the case of Smart (concession ends in December 2042), the concession agreement prescribes a toll rate of RM5 per Class 1 vehicle, rising to RM7 by 2030, whereas users are currently paying RM3.