Posted by rohank71 > 2022-07-14 08:27 | Report Abuse

EGM on 5 Aug.

Posted by csan > 2022-07-14 13:52 | Report Abuse

We note that the one of the Conditions Precedent to be fulfilled by ALR pursuant to the Finalised SSPAs is having successfully raised funds to make the required payments to each Vendor. In the event that interest rate increases to a level which is not feasible for ALR to raise its sukuk funding for the settlement of the Disposal Considerations resulting in this Condition Precedent not being fulfilled before the Long Stop Date(1), and ALR has no alternative source of funding, the Proposed Disposals cannot proceed. We wish to highlight that Bank Negara Malaysia (“BNM”) had on 11 May 2022 and on 6 July 2022 increased the Overnight Policy Rate (“OPR”) by 25 basis points respectively. We are of the view that any further increase in OPR by BNM may increase the completion risk for the Proposed Disposals.

Posted by csan > 2022-07-14 13:52 | Report Abuse

As at the date of this Circular, ALR is still in the process of securing sufficient financial resources to undertake the Proposed Disposals. The fund raising by ALR is expected to be completed by 15 August 2022.

Posted by csan > 2022-07-14 13:54 | Report Abuse

if ALR cannot secure the funding they want at 5% interest rate by 8 september which is the next Bank Negara meeting where interest rate is expected to go up by another 25bps, then the completion risk will increase significantly.

Posted by csan > 2022-07-14 13:56 | Report Abuse

anyway i differ from what they said in the circular. if cannot raise funds at 5%, just reduce offer price a little bit. simple. whereas they said in the circular that it cannot proceed.

Posted by EVEBITDA > 2022-07-14 16:32 | Report Abuse

csan, the bonds rates have peaked in April 2022 and has been on downtrend since. bond market has discounted future rate hikes.

Posted by EVEBITDA > 2022-07-14 16:34 | Report Abuse

10Y MGS was 4.5% in April and now its 4.06%. hope this calrifies ALRs position.

Posted by observatory > 2022-07-14 20:31 | Report Abuse

@EVEBITDA, good to hear from you.
Yes, the market is forward looking. BNM's subsequent OPR hikes would have been priced in. Unless there is a major market turmoil in the coming weeks ...
I also remember in ALR proposal they could extend concession periods (by another 6 years or so) to cover potentially higher debt servicing. I hope that provides sufficient buffer.

According to the circular issued today (page 56), Litrak Group level cost of debt is 6%.
In your view, what is the upper limit of the Sukuk rate that will put ALR funding at risk?

Posted by EVEBITDA > 2022-07-14 21:56 | Report Abuse

cost of debt is for Litrak specifically and not for ALR. ALR is buying at WACC of 7.95%. (see page 58) so provided borrowing cost below 7.95% and no reduced traffic ARL will pay down the loans earlier.

Posted by EVEBITDA > 2022-07-14 21:58 | Report Abuse

WACC is the dicount rate used on the FCF of Litrak to arrive at the valuation for ALR to buy. ALR is expected to make 7.95% returns per annum if bought by own cash.

Posted by EVEBITDA > 2022-07-14 22:01 | Report Abuse

technically we shareholder, if we held on to the shares till expiry would have enjoyed this returns provided no hiccups. or more if traffic grows strongly.

Posted by EVEBITDA > 2022-07-14 22:02 | Report Abuse

@observatory hope i have clarified ur concerns.

Posted by observatory > 2022-07-15 00:18 | Report Abuse

Thank you for your explanation. Let me try to understand the logic.

Based on my understanding, Affin looked at Litrak existing capital structure and other parameters, and it determined Litrak's WACC was 7.95% (page 58).

Applying this discount rate to management projected FCFF, it arrived at an equity value of 2,165 + 371 = RM2,536m, which was less than ALR's offer of 2,326 + 452 = RM2,778m (page 60)

That means if ALR were to use the same projected FCFF, its discount rate will have to be lower in order to arrive at the larger equity value of RM2,778m. But since the value is not much larger, the discount rate is probably not lower than 7%.

Given that ALR's funding is probably 100% debt, as long as its Sukuk rate is below 7%, the financing should be secured, right?

Posted by observatory > 2022-07-15 00:20 | Report Abuse

Refer to article below. The Work Minister said "For three highways [Kesas, SPRINT and LDP], the concession will be extended for five to 10 years, while [concession for] the SMART tunnel may be shortened, depending on the traffic data that will be reviewed from time to time"

https://www.theedgemarkets.com/article/highway-restructuring-concession-extension-three-highways-alr-shareholders-are-notforprofit

By allowing the concession to be extended as necessary, it lower ALR's risk that concession runs out before it could fully pay down its Sukuk. This may in turn improves the Sukuk's rating and lower the rate. But Minister only mentioned traffic volume as reason for extension.

Posted by observatory > 2022-07-15 00:47 | Report Abuse

I just realized I missed an important point.

The projected FCFF of RM2,536m by Litrak's management (page 60) includes government compensation for not allowing it to incresae toll.

However, ALR forgoes compensation which totals about RM2.31b ( =RM1.5b + RM1.62 * 50%, before converting to present value). Refer page 14.

On top of that, it needs to pay RM2.7b to Litrak upfront.

Therefore it will definitely need the extension of concession, and also a low borrowing rate to make the deal feasible. Just that it's unclear how low it has to be.

Am I right?

Posted by okdoke > 2022-07-15 10:31 | Report Abuse

@csan wrote "if ALR cannot secure the funding they want at 5% interest rate...then the completion risk will increase significantly."
@EVEBITDA wrote " 7.95%. (see page 58) so provided borrowing cost below 7.95% and no reduced traffic ARL will pay down the loans earlier"
@observatory wrote "below 7%, the financing should be secured, right? "
any more clarification from shareholders? thanks in advance

Posted by csan > 2022-07-15 13:03 | Report Abuse

EVEBITDA, that's Litrak's WACC. Litrak is a combination of debt and equity. ALR is clear that they are looking to raise debt at 5%. that's how observatory pointed out the higher value ALR is offering. but if cannot do 5%, then will just reduce offer price to around RM2.54 billion lah.

Posted by csan > 2022-07-15 13:03 | Report Abuse

not that the potential reduction in offer price is a lot...but ironshirt got so worked up. not hard to tell that he has a significant amount of capital in Litrak hahahaha. whereas most of us like me and speakup have taken a lot of profit at around 4.85-4.90 that day, so we're pretty chill because our holdings are quite small now. just waiting to see if there is opportunity to top up. if revised down to RM2.54 billion, then offer price will be at around current share price.

Posted by observatory > 2022-07-15 13:55 | Report Abuse

In May RAM has assigned triple A rating to ALR's proposed Sukuk. As of yesterday, 10Y MGS yield is 4.07% as mentioned by EVEBITDA. 10Y Corp AAA yield at 4.67%.

https://www.ram.com.my/pressrelease/?prviewid=5986
https://cweb.bpam.com.my/op/o4008.asp

Posted by observatory > 2022-07-15 13:56 | Report Abuse

RAM also stated that "If it performs to the Issuer’s expectations, the Proposed Sukuk will be fully cash backed by May 2033, against RAM’s expectation of May 2035 under the sensitised projection"

In other words, RAM expects Sukuk to be repaid shortly after the original concession period ends by 2030-34.

Posted by observatory > 2022-07-15 13:58 | Report Abuse

Meanwhile, the Minister has mentioned LDP and SPRINT "concession will be extended for five to 10 years". In other words, up to to 2040-44 if necessary.

This would have provided sufficient buffer against uncertainty. Therefore even if 10Y AAA were to hit 5% (it's not), I don't believe 5% is a hard limit. I can't find any mention that crossing 5% the deal will fall through. Not sure where the 5% comes from.

But I'm interested to know at what level of yield (I believe higher than 5%) the financing could be in trouble.

Posted by 2Invest > 2022-07-15 14:56 | Report Abuse

Yup. The idea is asalkan ALR tak rugi sudah. I am prepared to pay LDP even after 2024.

Apa pun boleh jadi in Bolehland. LOL

Posted by EVEBITDA > 2022-07-15 22:07 | Report Abuse

@observatory, Litrak proposed to sell their Assets at say 7% WACC. Thats the value of the asset (based on the concession agmt). ALR buys and proposes (obviously with Litraks support) to waive Govt Subsidy (and no more toll hike) and in return gets tax waivers ect. We all know Govt saves abt 4B in waiver of Subsidy whilst forgoing Tax hence geting ALR to buy at 5B.
If ALR sticked to the concession agmt terms and raise bonds at below 7% they make money (provided traffic forecast and actual is same). Since ALR has changed the terms of concession agmt, its deemed a new proposal and hence has diff factors to consider. Thats why MOW gave them up to 2040-2044 as buffer to ensure the fund raising is successful. This proposal is a BIG win for the GOM to avoid paying the subsidy. You may see all approvals has been obtained from GOM even before Litrak shareholders. Its not normally the case in other deals. Lets not worry too much and hope shareholders do not vote against the proposals.

Posted by observatory > 2022-07-16 01:17 | Report Abuse

@EVEBITDA, yes, according to the list of conditionality published last month, the approval from all three ministries have already been obtained. The remaining conditions are for the vendor and purchaser.
This has greatly reduced the political risk, where the Parliament is dissolved before necessary approvals can be obtained.

Posted by observatory > 2022-07-27 12:09 | Report Abuse

Earlier someone commented that ALR financing threshold was 5%.

In today Gamuda EGM, the management clarified that this was a misunderstanding. During an earlier interview with The Edge, Gamuda management mentioned ALR's WACC was 5%, and not that ALR's financing threshold was 5%.

While Gamuda could not speak on behalf of ALR, the management sounded positive by drawing attention to the fact that 10Y MGS had gone down by 40 basis point from 4.37% earlier to 3.97% as of yesterday.

Posted by speakup > 2022-07-28 07:43 | Report Abuse

haiz! wait so long

Posted by IronShirt > 2022-07-28 09:47 | Report Abuse

CEO is privilege to read confidential Documents is disposing Shares every Day. Almost 99% looking for
another Job.............Used car salesman maybe

Posted by speakup > 2022-07-30 10:11 | Report Abuse

thats why speakup sold some, just in case
but still hold some, just in case

Posted by speakup > 2022-08-02 07:53 | Report Abuse

something brewing.........

Posted by okdoke > 2022-08-05 14:53 | Report Abuse

Shareholders don't forget to cast your vote on highway disposal at EGM 3.30pm . today. Thanks in advance

Posted by 2Invest > 2022-08-05 15:54 | Report Abuse

Voted

Posted by observatory > 2022-08-05 16:56 | Report Abuse

I attended the EGM. As expected, questions about ALR financing came up.

To be fair, Litrak could not answer on behalf of ALR. So just like Gamuda, it could only point out conditions in ALR favor, such that it was triple A rated, first sustainable highway Sukuk, MGS yield has been coming down and so on.

It's funny that the Chairman assigned all the questions to their advisors, including questions which rightfully the Board itself should answer.

For example, when someone asked whether an extension would be given if ALR fails to raise funding in time, the Chairman asked Hong Leong to reply. But how could Hong Leong commit on behalf of Litrak board? So it was not a surprise that the Hong Leong guy just sidestepped the question and talked about something else.

This shows how much ownership the Board has in their company. I agree when someone mentioned that these people are probably busy looking for another job.

Posted by IronShirt > 2022-08-07 09:15 | Report Abuse

It is a Done Deal. Only EPF want to buy lower than 5.08. EErie silence next week onwards to DELISTING date

Posted by speakup > 2022-08-08 07:42 | Report Abuse

5.08 mali!
5.08 lai!

Posted by speakup > 2022-08-09 07:55 | Report Abuse

https://www.theedgemarkets.com/article/gamuda-litrak-shareholders-greenlight-sale-highway-assets

5.08 coming!

Posted by Kris Wong > 2022-08-09 11:30 | Report Abuse

Anyone got any idea roughly how much time more the full completion of the highway disposal will take ?

Posted by observatory > 2022-08-09 15:25 | Report Abuse

Assuming no hiccup, over 90% of proceeds will be distributed to shareholders within 45 days of completion date, where completion date is expected to be 15 Aug. The remaining will be distributed within 12 months.

Posted by Kris Wong > 2022-08-09 17:02 | Report Abuse

TQVM observatory, btw where to find this proposed distribution details ?

Posted by observatory > 2022-08-09 17:59 | Report Abuse

You can check the Circular to Shareholders published a few weeks ago.

Posted by csan > 2022-08-09 19:08 | Report Abuse

observatory, lol do you realise that ALR has not even made any formal approach to investors yet for the sukuk?

Posted by csan > 2022-08-09 19:11 | Report Abuse

raising funds through sukuk is similiar to ipo on bursa. for ipo, first step need to lodge exposure document with SC, then get Bursa approval and a long list of procedures. ALR has not even started the first step for their sukuk.

Posted by 80gram > 2022-08-10 08:06 | Report Abuse

can check with fixed income friends? My sources confirm IM/offering circular was out in late July...bookbuilding soon...

Posted by stockraider > 2022-08-10 08:13 | Report Abuse

A word of caution loh!
Election is around the corner mah!

Thus a potential change of Govt may get the deal derailed loh!
Even if BN wins, the new PM may not be Ismai Sabri, the new PM may have other thoughts to favor its cronies mah!

Thus quite risky even, if Litrak & Gamuda shareholders already approved the deal, furthermore the profit margin is not that high loh!

But the risk of failure is very high loh!

Posted by 80gram > 2022-08-10 08:26 | Report Abuse

the deal is bad politically?

Posted by Kris Wong > 2022-08-10 14:42 | Report Abuse

Buy some from spare fund after considering the returns vs risks at the moment with all the necessary approvals as todate which looks in favor of the potential returns. Anyone done any computation on the effective returns on this investment on the basis there is no hiccup with distributions as per the announced timetable ?

Posted by rohank71 > 2022-08-10 14:58 | Report Abuse

the expected ALR Bond Issue is last week of Aug based on book building which is being done by bankers.

Posted by rohank71 > 2022-08-10 14:59 | Report Abuse

money paid by ALR to Litrak will be by end Aug and first payout of 4 52 to shareholders by mid Oct.

Posted by 80gram > 2022-08-10 15:14 | Report Abuse

consistent with what i heard..

Posted by firehawk > 2022-08-10 15:16 | Report Abuse

US markets are about to dip now .... if US slump, even fixed income stock will provide bargain opportunity :D

Posted by speakup > 2022-08-11 07:54 | Report Abuse

speakup bought 3.80.
sold some just in case deal no go. hold remaining for 5.08.