Published on 18 Oct 2018.
RAM Ratings has reaffirmed the AAA(fg)/Stable rating of the remaining RM210 million Guaranteed Class E Bonds issued under Mecuro Properties Sdn Bhd’s RM900 million Nominal Value Bonds. The reaffirmation of the rating is premised on an irrevocable and unconditional financial guarantee insurance (FGI) facility extended by Danajamin Nasional Berhad. Danajamin was last rated AAA/Stable/P1 by RAM on August 2018.
With initially five properties at issuance, the transaction is now backed by two remaining properties – eCurve and Menara Affin (collectively referred to as “the Portfolio”) – following the exercise of the first and second property call options in July 2015 and January 2018. In FY Dec 2017, the Portfolio’s overall net property income (NPI) was slightly lower y-o-y at RM12.3 million, although still within RAM’s expectations. The weaker showing was due to a moderation in eCurve’s performance. Nonetheless, the Portfolio has complied with all relevant covenants of the transaction, exceeding the covenanted NPI level of RM10 million.
Independent of the FGI, the Guaranteed Bonds are supported by the Portfolio’s good asset quality. The Portfolio is subjected to tenant concentration risk given that Affin Bank Berhad is the sole tenant of Menara Affin, which contributed a substantial 87.2% of the Portfolio’s NPI in FY Dec 2017. Although Affin Bank’s new 47-storey headquarters at Tun Razak Exchange is targeted for completion by December 2020, the management has indicated that there is a high likelihood of the Bank extending its lease (expiring in February 2019), albeit for a shorter term. That said, we note that the sponsor, Boustead Properties Berhad (Boustead), has signalled an intention to exercise the last property call option by January 2019, the proceeds of which will be used to meet coupon payments and the final redemption of the Bonds upon their expected maturity. RAM will closely monitor the transaction in this regard and withdraw the rating upon final redemption of the Guaranteed Class E Bonds.
Mecuro is a special-purpose vehicle incorporated to facilitate a sale-and-leaseback transaction sponsored by Boustead (the Seller). Subsequent to the sale of the Properties, Mecuro will lease them back to the Seller. Coupon obligations under the Bonds will be met via semi-annual lease payments from the Lessees while principal repayment will be fulfilled through the disposal of the Properties.
Lim Chern Yit
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