RAM Ratings reaffirms ratings of Quill Retail Malls’ financial/bank-guaranteed debt issue

Published on 30 April 2015

RAM Ratings has reaffirmed the ratings of Quill Retail Malls Sdn Bhd’s (QRMSB or the Company) RM850 million CP/MTN Programme (2013/2020) as follows:

Tranche	Issue Size (RM million)	Ratings	Guarantor
A	Up to 260	AAA(fg)/Stable/P1(fg)	Danajamin Nasional Berhad
B	Up to 260	AAA(bg)/Stable/P1(bg)	DBS Bank Ltd
C	Up to 180	AAA(bg)/Stable/P1(bg)	United Overseas Bank (Malaysia) Berhad
D	Up to 150	Unrated	None

The enhanced ratings reflect the irrevocable and unconditional financial or bank guarantees extended by the respective Guarantors. The guarantees enhance the credit profile of Tranches A, B and C of the CP/MTN Programme beyond QRMSB’s stand-alone credit strength.

Excluding the guarantees, QRMSB’s ability to repay the lumpy RM650 million under the CP/MTN Programme will be heavily reliant on the completion of disposal of Quill City Mall (the Mall) to the Employees Provident Fund (EPF). We are cognisant of the sustainability of the Mall’s income generation as it goes through a gestation period. With the selling price of Quill City Mall and payments from the EPF subject to the operating performance of the Mall, any potential underperformance in its net operating income may translate into a lower selling price that gives rise to a shortfall in its 2017 debt repayment.

Meanwhile, QRMSB is highly leveraged, with an adjusted gearing ratio of 3.5 times as at end-December 2014 (end-December 2013: 3.2 times). In addition, its operating cashflow debt cover is expected to remain thin in the near term on the back of hefty debt load.  

On a positive note, Quill City Mall’s strategic location fronting Jalan Sultan Ismail provides it with much visibility. Accessibility to the Mall is enhanced by direct connectivity to a monorail line and adjacent office building through a covered elevated walkway, as its close proximity to hotels and other office towers around the area enhance the Mall’s footfall potential. Elsewhere, a fairly good and diverse tenant mix at the Mall offers a holistic shopping and entertainment experience for the mass market. As at end-December 2014, about 77% of the Mall’s total net leasable area had been leased out.

QRMSB is a project company undertaking the development of some 7 acres of freehold land (with partially built buildings) located along Jalan Sultan Ismail, Kuala Lumpur, into an integrated mixed-development known as Vision City. Proceeds of the debt issue are primarily utilised for the redevelopment of Quill City Mall, which commenced operations in 4Q 2014.

Media contact
Juliana Koay
(603) 7628 1169
juliana@ram.com.my