RAM Ratings has reaffirmed the AAA/Stable rating of Eternal Icon Sdn Bhd’s (EISB) RM87.0 million Senior MTN.

Published on 17 Apr 2017.

RAM Ratings has reaffirmed the AAA/Stable rating of Eternal Icon Sdn Bhd’s (EISB) RM87.0 million Senior MTN. The reaffirmation reflects the collateral’s healthy performance during the reviewed period, with strong rental reversions and almost-full average occupancy despite a marginal increase in its net lettable area (NLA). In 2016, Plaza 33’s (the Property) net property income (NPI) improved to RM22.8 million (unaudited), comfortably above our assumed sustainable cashflow of RM18.5 million per annum. This continues to provide stable support to RAM’s adjusted valuation of RM194.7 million for the Property. The resultant loan-to-value ratio of 44.7% and stressed debt-service coverage ratio of 2.50 times remain consistent with our benchmarks for an AAA rating.

While the Property’s performance came in above our expectations, we have maintained our sustainable cashflow assumption for now given the asset’s limited track record, having just passed its first tenancy-renewal cycle. Furthermore, the impact from the numerous impending property developments in the vicinity remains to be seen. Meanwhile, EISB has proposed to acquire a designer suite attached to 343 accessory car-parking bays located at PJ Centrestage, as well as additional construction to increase its NLA. Given these considerations, RAM will maintain close monitoring of the progress/developments and will revisit our sustainable NPI in due course. EISB will use the net rental collections from the Property to pay its coupon obligations on the Senior MTN. The principal redemption is expected to be met through the exercise of the Property Call Option upon the expected maturity, or refinancing through the issuance of the Subordinated Class MTN (Sub-MTN); failing this, it will be done through the sale of the Property by the Security Trustee.

In 2016, almost all of the tenancies due the same year were renewed, with rental reversions of between 9% and 15% (over a period of 3 years). Although the tenant profile remains concentrated, the Property’s lease-maturity profile is spread out, with a respective 25%, 33% and 42% of its total tenancies expiring in 2017, 2018 and 2019. As at end-December 2016, the Property’s top 3 tenants collectively occupied 44.8% of its total NLA and contributed 42.9% of its total rental income for the year. Nonetheless, we have maintained our opinion that the Property is of above-average quality, as reflected in our RAM Property Score of O-3.65, out of a maximum of O-5.00.

This transaction is a commercial real estate-backed transaction sponsored by Plaza 33 Sdn Bhd – the owner of Plaza 33, an integrated commercial office building in Section 13, Petaling Jaya. Under the 15-year MTN Programme of up to RM400.0 million, RM86.0 million of Senior MTN and RM220.0 million of Sub-MTN have been issued to date. 

Analytical contact
Lim Chern Yit
(603) 7628 1035
chernyit@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my