KUALA LUMPUR: MARC Ratings has flagged 32-km Setiawangsa-Pantai Expressway (SPE) toll concessionaire Lebuhraya DUKE Fasa 3 Sdn Bhd's (DUKE 3) for cashflow issues.
It revised its rating outlook on the concessionaire to negative from stable due to the thinning liquidity buffer to meet its financial obligations under the rated programme.
It maintained its AA-IS rating on the toll concessionaire's outstanding RM3.64 billion sukuk wakalah.
DUKE 3 is the concessionaire for the SPE that connects Middle Ring Road 2 at Wangsa Maju to Kerinchi Link adjoining the Federal Highway.
SPE was fully opened to motorists on Nov 3, 2023, and started tolling on Dec 3, 2023, three years later than the original forecast due to considerable delays in project completion resulting from changes in alignment and the pandemic-induced restrictions.
MARC Ratings said in a statement, given the tolling delay, traffic levels were lower than projected.
The actual average daily traffic (ADT) between January and June 2024 of 51,176 vehicles was lower than the 97,454 vehicles forecast for the first year of tolling under the 2019 traffic study on which the original base case cash flow projections were based.
It said that a new traffic study commissioned in July 2024 has forecast ADT to be lower by 40 per cent-45 per cent from the 2019 projections.
"Against this backdrop, toll collection has been lacklustre," it said.
The rating agency said DUKE 3's near-term liquidity is modestly sufficient to meet its financial obligations only up to August 23, 2025.
It is projected to have about RM387.7 million against principal repayments and profit payments totalling RM338.5 million.
"As such, DUKE 3 would need to address its tight liquidity position promptly by undertaking measures, among which is pursuing a sukuk restructuring plan to be completed within the next 12 months." "Other measures include a potential asset monetisation and the potential entrance of a new equity partner. The group also expects some compensation payout from the government arising from the delays," it said in the statement.
MARC Ratings said the extent and structure of the sukuk restructuring will depend on the outcome of its other initiatives.
"The restructuring plans appear reasonable, which MARC Ratings believes will be supported by the long concession period to August 5, 2069, and an improving, albeitgradual, m-o-m traffic flow seen in 1H2024," it said.
The rating agency also said there is a potential for a default being called upon by sukuk holders for certain non-compliance or potential non-compliance of terms pending the completion of the Sukuk Restructuring.
DUKE 3 has sought sukuk holders' waivers for these, which the company expects to resolve before the end of August.