KUALA LUMPUR (May 30): Malaysian Rating Corp Bhd (MARC) has placed all the issue ratings in its toll road universe on "MARCWatch Developing" following increased uncertainty over the government's exact plans to scrap toll chargers.

The "Developing" designation in the MARCWatch conveys the uncertainty around the credit trajectory of the affected issuers arising from the proposed abolition of road tolls.

In a statement today, MARC said it currently rates 10 toll concessionaires with an aggregate outstanding of RM33.1 billion. This includes Konsortium Lebuhraya Utara-Timur (KL) Sdn Bhd, Sistem Penyuraian Trafik KL Barat Sdn Bhd, MEX II Sdn Bhd and Lebuhraya Duke Fasa 3 Sdn Bhd.

"MARC observes that in more recent periods, concession tenures were extended to compensate concessionaires for toll revenue losses arising from the abolition of tolls at selected toll collection points and the deferment of scheduled toll hikes," it said.

However, MARC said the government's annual cash compensation commitments due to deferred toll hikes have remained sizeable in aggregate.

"For a significant number of project bonds and sukuk in MARC's toll road universe, the timely implementation of scheduled toll hikes and/or payment of cash compensation for toll hike deferments is referenced as an important recurring rating consideration," it explained.

MARC believes that the approach the government will take to abolish tolls would be to minimise the impact on public finances and forestall any untoward effect on capital markets.

Nonetheless, MARC opined that the lack of historical precedents suggests that the eventual course of action chosen will be a test of public-private partnerships for project owners, debt holders and the public sector, and may impact other segments of infrastructure financing.

"Available options include an early termination of the affected concessions and the renegotiation of concessions possibly involving the conversion of the 'user pays' toll roads to long tenure shadow toll roads in which no actual tolls are collected from the public," it added.