This article first appeared in The Edge Malaysia Weekly on May 12, 2025 - May 18, 2025

THE jewel in the crown of Tan Sri Abu Sahid Mohamed’s Maju Group is MEX Expressway Sdn Bhd (MESB), concessionaire and operator of the Maju Expressway (MEX), which is seeing robust daily traffic.

Abu Sahid has been unable, however, to tap the finances of the 26km highway since 2022, following a restructuring that put bondholders in charge of the company and kept a tight lid on the cost of maintaining the highway.

“The highway is hitting new highs in terms of traffic volume. The government compensation owed to MESB is growing. But [the ultimate holding company] Maju Holdings Sdn Bhd is unable to restructure and tap into the growing traffic because the highway is essentially under the control of bondholders,” says a banker.

“If Abu Sahid wants to capitalise on MEX, he has to buy out the bondholders. But getting the confidence of financiers to fund the exercise has been a problem. The situation has become worse with [the MACC] investigations into MEX II.”

The government is seeking a white knight to rescue MEX II — the 16.8km extension of MEX that connects Putrajaya to Kuala Lumpur International Airport (KLIA). MEX II is currently mired in legal and financial woes.

“Any company that goes in to rescue MEX II would want some kind of control over MEX because both highways are connected. Moreover, to make MEX II financially viable, there has to be some kind of financial assistance from the government, bondholders or a cross-subsidy from the healthy toll collection from MEX,” says the banker.

As at end-2023, about RM100 million of MESB’s estimated revenue of RM236 million was government compensation for enforcing a toll rate lower than that stipulated in the concession agreement (CA). In 2022, the compensation amount was RM41 million from a toll revenue of RM180 million.

The rise in compensation payments in 2023 was due to a scheduled toll hike that did not take place. The amount is expected to keep growing until the concession ends in 2045.

A highway consultant says the government has made it clear that it will not compensate any concessionaire. In response, all concessionaires have been restructuring their agreements to align cash flows with liabilities, in line with the government’s move to cut subsidies.

“This is why MESB’s receivables are rising and could affect ratings in the future, unless the bonds are restructured to extend the concession period and repayment schedule,” says the highway consultant.

According to a RAM review, close to 40% of the toll revenue recognised by MESB comes from government compensation. The rating agency estimated total government compensation to MESB could amount to a staggering RM2.2 billion by 2040, based on the current scheduled toll rates. And this is why the government wants the bonds, which are issued by the immediate holding company of MESB, to be restructured.

The immediate holding company of MESB is MEX 1 Capital Bhd, formerly known as Bright Focus Bhd. Bright Focus had issued a RM1.35 billion Islamic bond in 2014 with a rating of “AA” because repayment was from the proceeds of toll collection from MEX.

A bondholder says it was not all “hunky-dory” with the bonds. “There was nothing ‘bright’ about the company because it was not ‘focused’ on repaying debts raised using the toll collection of MEX,” he says.

Maju Holdings, which Abu Sahid controls, was in charge of Bright Focus then. Although MESB, as the concessionaire, is responsible for maintaining the highway, most maintenance work is handled at the shareholder level, specifically by Maju Holdings

“The bondholders of Bright Focus could not do anything, as the cost of maintaining the highway increased and money was being moved to Maju Holdings. The trustees issued a legal letter in 2019 and it prompted a restructuring,” says the bondholder.

By 2019, Bright Focus’ bond was downgraded to “BB1” and at risk of a further downgrade to a “D” rating on account of money being advanced to Maju Holdings. According to a RAM report, RM97 million was advanced in 2018 to the ultimate holding company, Maju Holdings, violating the terms of the bonds.

During the restructuring process, investment bankers identified several flaws in the bond structure. Among these were a single signatory on Bright Focus’ accounts and a lack of controls on the permissible spending for highway maintenance.

“There were more than 15 companies maintaining the highway, most of which led to Maju Holdings,” says a bondholder.

The restructuring, which saw Bright Focus change its name to MEX 1 Capital Bhd, was completed in 2022, along with changes that ensured money could not be disbursed without bondholders’ approval.

Among the significant changes were signatories to the account, the composition of directors in MEX 1 Capital and imposition of several levels of approval before any spending to maintain and upkeep the highway received the green light.

“The board at MEX 1 Capital now comprises two independent directors representing bondholders. The board at MESB has only one representative from Maju Group and there is a tight rein on expenditure to upkeep the highway,” says the bondholder.

MEX 1 Capital’s latest rating upgrade to “A1” reflects the improved governance structure in the company.

The improved ratings on MEX 1 Capital’s bonds are of no help, however, to Abu Sahid, who is saddled with the incomplete MEX II highway. The project was started in 2016 with bonds of RM1.3 billion raised and was supposed to be completed by 2019.

MEX II has only RM30 million left on its books and its concessionaire, MEX II Sdn Bhd, has been under receivers and managers (R&M) since 2022 for defaulting on its bonds.

Also, the Malaysian Anti-Corruption Commission (MACC) is investigating the concessionaire for false claims of RM416 million drawn down supposedly for work done.

Abu Sahid himself has been open to the sale of MEX. In 2012, auto parts manufacturer EP Manufacturing Bhd (KL:EPMB) proposed to buy the highway for RM1.2 billion. The deal was frowned upon and even invited a rebuke from former prime minister Tun Dr Mahathir Mohamad.

In response to a question on the proposed sale of MEX, Dr Mahathir had said: “You sell what is yours … You don’t sell what belongs to others. It could be as bad as selling APs [approved permits].”

This comment clearly refers to the RM976.6 million in government funding provided to MESB for the construction of MEX, which remains on the company’s books but has since dwindled to about RM770 million.

In the construction industry, the view was that Abu Sahid did not need to borrow extensively to complete the 26km MEX because of this government support.

According to a rating report, MESB had a share capital of only RM60 million and Abu Sahid put in another RM87 million as advance. MESB raised RM529 million in borrowings to complete the highway, which was opened in 2008.

Abu Sahid was known to be among those who benefited from previous administrations, especially under Dr Mahathir. His big break came from the privatisation of loss-making Perwaja Steel Sdn Bhd in 1996 for just above RM1 billion then. The agreement was finally signed in 2003. Between 1996 and 2003, Abu Sahid managed Perwaja Steel, and the transactions between him and the government during that period, before the handover, were opaque.

Furthermore, the final amount that he paid for privatising the steel company was not disclosed.

Abu Sahid is also said to have had a fairly favourable deal with Lembaga Tabung Haji for the construction of one of the two towers in Maju Junction, located in the heart of Kuala Lumpur.

It will come as no surprise if Abu Sahid exits MEX, but will it be on his terms? 

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