RAM Ratings releases enhanced rating criteria for toll road projects

Published on 10 Mar 2022.

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RAM Ratings has published updates to its rating criteria and methodology for toll road projects. While our fundamental considerations in assessing risks for toll road projects remain broadly the same, we have enhanced our assessment of these risks, particularly the traffic demand risk component. This allows us to further differentiate the risk factors of highways with ready catchment areas and mature alignments and risks associated with greenfield projects, which are additionally exposed to construction and land acquisition-related issues as well as traffic underperformance risk. 

The criteria revision aims to provide further granularity and transparency in RAM’s traffic demand risk assessment, giving credence to the development of Malaysia’s road infrastructure sector, our observations of the toll road sector’s performance through economic cycles and, in particular, over the last 24 months as the country went through phases of mobility restrictions. 

We highlight that these attributes were previously considered in our analysis under stressed assumptions. We believe that a distinction can be made between mature highways with stable and predictable traffic patterns and greenfield highways with no traffic data. 

The improved risk analytical framework would facilitate risk assessment in a more objective and consistent manner across all rated road infrastructure projects to determine the individual project risk profile relative to our indicative credit metrics for toll roads. RAM’s indicative debt service or financial service coverage ratio (DSCR/FSCR) metric guidance has also been concurrently updated.

The revised paper addresses recurring queries that RAM receives, by describing key considerations behind its commonly applied stressed assumptions in analysing the transaction cashflow for a greenfield and/or operating highway. Barring negative developments (all else equal), the ratings of transactions supported by greenfield projects may see positive credit migration (over the life of the respective concession tenures) as traffic demand risks subside and traffic patterns stabilise. The paper also discusses how RAM factors environmental, social and governance risks into its rating assessment.
Following the criteria update, we have placed three rated transactions under review for a possible revision of outlook or potential upgrades. None of the rated highways in our portfolio are expected to face consequent negative rating action. We will finalise our reassessment of these credits over the next two to three months, pending a review of the respective highways’ more recent traffic performance.

For further details, please click here for the full revised criteria paper, Toll road rating methodology, or here for the accompanying In Summary: RAM’s criteria enhancements for rating toll road projects.

Analytical contacts
Davinder Kaur Gill
(603) 3385 2525

Yip Chee Meng
(603) 3385 2516


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RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2022 by RAM Rating Services Berhad

Publication Date Published Category
TOLL ROAD PROJECTS RATING METHODOLOGY 10-Mar-2022 Criteria & Methodology View PDF

In summary: RAM’s criteria enhancements for rating toll road projects 10-Mar-2022 Criteria & Methodology View PDF