Open road
It was an audacious scheme – five prominent industry figures would put up M$1,000 each to establish Amanat Lebuhraya Rakyat to undertake a fully debt-funded acquisition of four mature highways. The outcome was a hugely successful M$5.5bn (US$1.3bn) multi-tier project financing sukuk that scored a few landmarks.
September’s deal was the largest corporate sustainability sukuk, the first such sukuk from the highway sector in Malaysia and the largest ringgit-denominated corporate sukuk of 2022 at that time.
The ultimate goal of ALR’s acquisition was to repay all debt and toll concessions, after the government had either frozen toll rates or implemented zero tolls to help the public.
Previous highway sponsor Gamuda had since 2019 sought ways to ease its own financial load created by the government’s toll actions.
Various schemes had been explored, including a government proposal to buy back the concessions and their combined M$2.06bn debt. This was abandoned as it would have sharply raised government debt.
Instead, ALR offered to acquire the four highway concessionaires that Gamuda owned. That would leave Gamuda cash rich, and able to turn its efforts to other infrastructure projects.
The transaction was shaped by AmInvestment Bank, which was financial adviser on the acquisition as well as principal adviser and joint lead arranger with CIMB and Hong Leong Investment Bank, and joint lead managers Maybank, RHB and United Overseas Bank.
As a non-government and non-profit company, ALR battled some headwinds. Investors were unsure about a company with a special purpose vehicle structure and no strong sponsor, and hesitant about an entirely debt-funded acquisition.
The issuer and sole financial adviser AmInvestment Bank sold the deal on the strong and predictable revenues from the highways, which serve as key arterial routes in the capital city of Kuala Lumpur.
“In the end, the sustainable and robust cashflow from the highways trumped our concerns over the shareholding structure,” said a major investor.
The deal also had ring-fencing features to protect investors. No dividends are to be paid throughout the sukuk lifespan, while operational and capital expenditures are capped and surpluses are to be set towards debt repayment.
The resulting ALR trade consisted of 13 tranches of sustainable and responsible investment sukuk. Three tranches, with tenors of 12, 13 and 15 years, were privately placed. The other 10 tranches were publicly marketed, with tenors ranging from two to 11 years. The sukuk pulled in orders exceeding M$5.6bn.
Once the notes are repaid, projected to be by the end of year 11, all four roads will be returned to the government.
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