MARC Ratings has assigned a preliminary AA-IS rating with a positive outlook to Konsortium Lebuhraya Utara?Timur (KL) Sdn Bhd's (Kesturi) proposed Sukuk Murabahah Programme of up to RM2.3 billion (Proposed New Sukuk).

The Proposed New Sukuk will be used to refinance Kesturi's existing Senior Sukuk and Junior Bonds. Under the proposed transaction, CIMB Investment Bank Berhad, as the sole arranger, will acquire the existing financing from current holders and subscribe to RM2.15 billion in nominal value of the Proposed New Sukuk. The ratings on the existing financing will be withdrawn upon its cancellation.

The refinancing is expected to enhance Kesturi's financial flexibility by extending the debt repayment profile, reducing annual principal obligations and lowering the minimum finance service coverage ratio (FSCR) covenant to 1.25x, while maintaining the post-distribution threshold at 1.50x. Completion of the transaction is targeted by end-December 2026.

The rating reflects Kesturi's mature toll road operations, supported by the established traffic profile and proven cash flow generation of the Duta?Ulu Kelang Expressway Phases 1 and 2 (DUKE 1 and DUKE 2). The Proposed New Sukuk is expected to materially strengthen Kesturi's debt-servicing profile through a longer repayment tenure and more sustainable amortisation schedule. The sukuk will be fully amortised by FY2047, providing a 12-year tail before concession expiry in August 2059, excluding the 10-year extension option. These strengths are moderated by elevated leverage and the risk of delays in receiving government compensation for deferred toll hikes. The expected improvement in Kesturi's credit profile under the proposed refinancing supports the Positive outlook.

Traffic performance remained resilient in FY2026, with aggregate annual average daily traffic increasing by 2.2% y-o-y to 241,061 vehicles. Revenue rose by 30.2% to RM365.2 million, driven by higher government compensation and continued traf