MRCB enters into RM1.32b concession termination agreement with government for EDL

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KUALA LUMPUR (Nov 12): Malaysian Resources Corp Bhd (MRCB)’s indirect wholly-owned subsidiary MRCB Lingkaran Selatan Sdn Bhd(MLSSB) (MLSSB) has entered into a termination and settlement agreement with the government, in relation to the Concession Termination of the Eastern Dispersal Link Expressway (EDL).

In a filing with Bursa Malaysia this afternoon, MRCB said pursuant to the termination agreement, the government will pay MLSSB, which MRCB owns via MRCB Prasarana Sdn Bhd, a sum of RM1.32 billion, subject to terms and conditions in the termination agreement.

Both MLSSB and the government have also agreed that the termination agreement came into effect on Jan 1, 2018.

To recap, MLSSB was awarded the EDL Concession by the government pursuant to a 34- year concession agreement signed on June 26, 2007. Under the Concession Agreement, MLSSB was granted the right to design, construct, manage, operate and maintain the EDL, the administrative office and the ancillary facilities on the EDL, as well as to demand, collect and to retain toll from all vehicles liable to pay toll.

Tolling on the EDL is based on an “open” concept, whereby motorists entering and exiting the causeway will be charged a flat rate, depending on their vehicle classification.

As part of the financing for the construction and development of the EDL, MRCB Southern Link Berhad (MSLB), which is a wholly-owned subsidiary of MLSSB, had on June 23, 2008, issued a senior sukuk in the aggregate nominal value of RM845 million and junior sukuk in the aggregate nominal value of RM199 milllion pursuant to the terms of the Trust Deed between MSLB and CIMB Islamic Trustee Berhad dated June 5, 2008.

Other than the Senior Sukuk and Junior Sukuk issuance, MSLB had also obtained a term loan facility of RM220 million for the construction and development of the EDL. The term loan was fully settled during the financial year ended Dec 31, 2017. The EDL was completed and the “Sijil Kesempurnaan Pembinaan Lebuhraya” was issued by Lembaga Lebuhraya Malaysia in March 2012.

On Dec 22, 2017, MLSSB received a letter from Ministry of Works Malaysia, informing MLSSB of the abolishment of toll collection on the EDL effective Jan 1, 2018, and that the concession period of the EDL would end on Dec 31, 2017 and that the governemnt would take over the EDL thereafter .

Furthermore, the government had by way of publication of Federal Government Gazette, namely the Federal Roads (Private Management) (Collection of Tolls) (Eastern Dispersal Link Expressway (EDL) (Revocation) Order 2017 (Gazette Order 2017), revoked the authorisation previously granted to MLSSB to collect toll on the EDL, to take effect on Jan 1, 2018.

For clarification purposes, the Concession Termination does not entail any transfer or disposal of MLSSB and MSLB to the GOM.

As at Nov 8 2018, the total cost and net book value of EDL service concession assets are approximately RM1.33 billion and RM1.13 billion respectively.

The concession termination is subject to an approval from shareholders of MRCB at an extraordinary general meeting to be convened, and approvals from the senior and junior sukuk holders.

The application to relevant authorities in relation to the Concession Termination is expected to be submitted within two months from today.

Trading in MRCB's securities was halted from 9am this morning and will resume at 2.30pm today.