Wednesday, November 15, 2017

FW: RAM Ratings reaffirms ratings of Sukuk Ijarah backed by Ampang Point Shopping Centre

 

Published on 14 Nov 2017.

 

RAM Ratings has reaffirmed the ratings of Purple Boulevard Berhad’s (the Issuer) RM250 million Sukuk Ijarah under its RM450 million asset-backed Sukuk Ijarah Programme (the Programme). The Issuer is a special-purpose vehicle sponsored by Nadin Holdings Sdn Bhd and Nadin Management Sdn Bhd (also the Servicer) (collectively, the Originators) to undertake the securitisation of Ampang Point Shopping Centre (Ampang Point or the Property).

 

 Sukuk Ijarah

Rating/

Outlook

Amount of up to

(RM million)

Expected

Maturity Date

Legal

Maturity Date

 Senior Class A

AAA/Stable

95

11 November 2022

10 May 2024

 Senior Class B

AA3/Stable

15

13 November 2020

13 May 2022

 Senior Class C

A3/Stable

15

13 November 2020

13 May 2022

 Guaranteed Class D

AAA(fg)/Stable

125

11 November 2022*

10 May 2024

 Subordinated Class E

Not Rated

200

11 November 2022

10 May 2024

* Known as the Class D Mandatory Prepayment Date under the Class D Sukuk Ijarah.

 

The reaffirmation of the ratings of the Class A, Class B and Class C Sukuk Ijarah is premised on our expectation that Ampang Point’s performance will remain supportive of our assumed annual sustainable net property income (NPI) and also the assessed capital value of RM221.1 million. The collateral support generated by the Property remains intact, as reflected by the loan-to-value and stressed debt service coverage ratios of the respective Class A, Class B and Class C Sukuk Ijarah, which remain commensurate with our benchmarks for the relevant rating categories. The reaffirmation of the Class D Sukuk Ijarah rating reflects the credit standing of its guarantor, Danajamin Nasional Berhad, the rating of which was reaffirmed at AAA/Stable on 23 August 2017.

In fiscal 2016, Ampang Point recorded positive rental reversion as a result of the commencement of leases and revised rental rates of a related-party tenant. However, the Property’s average rental rate (ARR) slipped in 7M fiscal 2017, mainly because some tenancy agreements were renewed at lower rental rates during the period although we note that this downside risk is mitigated by the turnover rent component. Correspondingly, its NPI fell 1.9% to RM22.85 million (annualised), from RM23.29 million in fiscal 2016 – albeit still above our assumed annual sustainable NPI of RM20.00 million. Despite this, Ampang Point’s average occupancy rate (AOR) remained stable at 95%-96%. We note that rental reduction is part of the management’s tenant-retention strategy amid the challenging business environment. As such, we envisage its top-line growth to be constrained in the near to medium term, along with some margin compression. As at end-June 2017, the Issuer’s finance service coverage ratio of 1.72 times remained above the covenanted level of 1.50 times. In addition, we note that the Issuer has met the second principal build-up of RM7.50 million due in November 2017.

To improve the operating efficiency of Ampang Point, RM13 million from the Sukuk Ijarah’s issuance proceeds had initially been earmarked for asset enhancement. However, we note that only a small sum has been drawn to date as certain aspects of the capex plan had been held back due to possible revisions while negotiating with a prospective major tenant. We understand that the discussions had subsequently fallen through and the management is now adjusting its renovation plans while some minor renovation or upgrading work is already in progress. As part of the management’s plans to improve the Property’s performance, the Servicer is continually striving to create additional lettable space and enhance the Property’s tenant mix to drive footfall. These efforts, if they materialise, may provide upside to the Property’s cashflow. Nonetheless, our assessment does not accord any benefit to these considerations as such plans remain fluid at this juncture.

Meanwhile, single-asset concentration risk remains one of the key moderating factors. There is also tenant-concentration risk; the Property’s top 5 tenants accounted for 45.5% of its total net lettable area and 19.7% of its monthly gross rental income as at end-July 2017. Furthermore, the Property’s lease-maturity profile is lumpy as almost half of its tenancies will expire in 2018. That said, we expect minimal non-renewal risk from its top anchor tenants as one of them is a related party while 2 have been tenants since Ampang Point’s inception; the other 2 anchor tenants are only in their second rental cycles. 

Following the departure of key personnel at the level of the Servicer/Originator in late 2015, there had been some delays and oversight on the Servicer’s roles and obligations under the transaction. However, these had subsequently been resolved. Since then, the overall quality of the Servicer has improved although some challenges remain vis-à-vis obtaining the requisite information. RAM will maintain close monitoring of the transaction and observe the Servicer’s plans in ensuring its continuous compliance with the relevant terms. 


Analytical contact
Evelyn Quek
(603) 7628 1095
huijiun@ram.com.my

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

 

 

 

 

 

 

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.

Related Posts with Thumbnails