THE recent revival of several road projects that had been stalled in the wake of the 1997/98 financial crises is expected to prompt more toll concessionaires to opt for private debt securities (PDS) in the near to intermediate future.
The toll projects included the West Coast Expressway, KL North-East Expressway, Kuala Lumpur-Putrajaya Highway and Kajang-Seremban Highway, said Rating Agency Malaysia Bhd (RAM).
It said in a statement the expectation would be well supported with the positive performance of the bond market as a good avenue to source financing for such projects, given the sizeable funding requirements and the long gestation periods involved.
Malaysias bond market had achieved great strides in the post-financial crisis era, with greater investor appetite for longer tenure papers of up to 15 years compared with a maximum tenure of seven years previously, RAM said in its November issue of Rating Methodology on Toll Road Projects.
It said the bond market had also flourished under the sliding interest rates over the past few years, allowing many companies to fix their financing costs up front with highly attractive rates.
RAM said such developments in the bond market have had a positive spin-off effect for many toll road companies.
It said as toll roads were exposed to a wider spectrum of risk like traffic volume and regulatory risk, the financial risk was generally viewed to be higher than projects with no demand risk such as independent power producers.
The toll roads nowadays, RAM said, had gone through a life cycle with a traffic volume tend to be more volatile, as history had shown that public acceptance was usually tentative in the first couple of years.
RAM said the issue of substantial toll rate increase had also been a strong point of contention with the travelling public. We have seen that most toll concessionaires have had their toll rate structures amended after public dissatisfaction, it said.
RAM added that many toll road companies had well configured financing structures.
In 2002, RAM assigned AAA rating to Projek Lebuhraya Utara Selatan Bhd and AA3 ratings to Kesas Sdn Bhd, Lingkaran Trans Kota Sdn Bhd and Grand Saga Sdn Bhd.
In January 2003, it assigned AA3 rating to Expressway Lingkaran Tengah Sdn Bhd.
Fundamentally, it said the rating reflected the improved credit profiles of these companies, arising from more stable operating track records and healthier debt-servicing aptitudes. Bernama
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