PLUS to issue RM30b sukuk

HIGHWAY concessionaire Projek Lebuhraya Usahasama Bhd (PLUS) is set to issue RM30.6 billion sukuk on Thursday – touted to be the largest global sukuk and Malaysia’s single largest bond issuance to date.


In a press release Jan 8, PLUS said the sukuk issuance was a follow-through of the privatisation of Southeast Asia largest toll operator PLUS Expressways Bhd (PEB) and four other highway concessionaires. 


“The proceeds from the sukuk issuance will be utilised to part finance the purchase of assets, liabilities, businesses, undertakings and rights of five toll concessions – Projek Lebuhraya Utara-Selatan Bhd, Expressway Lingkaran Tengah Sdn Bhd, Konsortium Lebuhraya Butterworth-Kulim Sdn Bhd, Linkedua (Malaysia) Bhd and PBSB,” said PLUS, adding that the proceeds will also be utilised to fund capital expenditure, working capital and other general funding requirements.

The proposed sukuk has been accorded a “AAA” rating by the Malaysian Rating Corp Bhd (MARC) with the repayment profile ranging from five to 27 years and the weighted average yield at approximately 5%.


CIMB Investment Bank Bhd has been identified as the financial adviser, sole principal adviser and lead arranger, and joint lead manager for the transaction.


Commenting on the transaction, UEM group managing director and chief executive officer Datuk Izzaddin Idris said the sukuk issuance demonstrated PLUS' role in further enhancing Malaysia’s prominence in international Islamic capital markets, in line with the government's aspiration to establish the country as an Islamic financial hub.


PLUS is a wholly-owned subsidiary of PLUS Malaysia Sdn Bhd, an investment vehicle in which UEM Group Bhd owns a 51% stake and the Employees Provident Fund (EPF) 49%. The government has a “golden share” in PLUS to preserve its rights in strategic matters involving the country's national infrastructure projects.


In a newsreport last November, PLUS Malaysia was said to have crossed the final hurdle of the proposed acquisition of the expressway operators and has reached a consensus with the government on the revised terms of supplementary toll concession agreements.
The revised terms was reported to include five years of a toll freeze effective from 2011 for North-South Expressway (NSE), NSE Central Link (Elite), Malaysia-Singapore Second Crossing (Linkedua), Butterworth-Kulim Expressway (BKE) and Penang Bridge (P1B), and a slower pace of toll rate hike thereafter for all except P1B, the toll rates of which will remain the same through its concession period.


The new deal also involved the streamlining of the expiry dates for all the concessions to Dec 31, 2038, as well as a waiver of compensation owed by the government (comprising the RM2.9 billion outstanding balance to PEB and up to RM3.6 billion of future monies due from the five-year toll freeze).


According to EPF, it foresees investment in the toll concession to produce a dividend yield of between 5% and 6% over the concession period. Internal rate of return on its investment, on the converse, would be at least 10% as per the national pension fund manager's guidelines.


According to PLUS, it will also look into non-toll revenue like billboard advertisements to boost income, besides expecting a conservative traffic growth of 3% per year, for its expressways to generate increasing toll collections.


“There will also be continuous efforts to control costs to boost PLUS' bottom line, but expenses on the maintenance of expressways, especially in terms of ensuring safety, will not be compromised. The expenses on maintenance are expected to average in excess of RM800 million a year,” PLUS was reported as saying.


PEB, with a market capitalisation of around RM22.2 billion, was previously ranked among the top 20 largest companies in the local stock market. Its delisting saw the toll concession sector not being represented at all in the FBM KLCI.

[By Mohd Rashdan Jamaluddin, The Malaysian Reserve; Jan 9, 2012]