RAM Ratings has reaffirmed the ratings of Purple Boulevard Berhad’s (the Issuer) Sukuk Ijarah of RM250 million in nominal value under its RM450 million asset-backed Sukuk Ijarah Programme (Sukuk Ijarah Programme).

Published on 19 Jan 2017.

RAM Ratings has reaffirmed the ratings of Purple Boulevard Berhad’s (the Issuer) Sukuk Ijarah of RM250 million in nominal value under its RM450 million asset-backed Sukuk Ijarah Programme (Sukuk Ijarah Programme). The Issuer is a special-purpose vehicle sponsored by Nadin Holdings Sdn Bhd and Nadin Management Sdn Bhd (the Servicer) (collectively, the Originators), and had been incorporated for 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 2020	10 May 2024

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

The reaffirmation is premised on the net property income (NPI) of Ampang Point that has remained in line with RAM’s assumed sustainable NPI and supports our assessed capital value of RM221.05 million. The collateral support offered by the Property, 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, therefore remain commensurate with each rating category. The rating reaffirmation for the Guaranteed Class D Sukuk Ijarah reflects its guarantor, Danajamin Nasional Berhad’s credit standing, which was reaffirmed at AAA/Stable on 6 December 2016.

For fiscal 2015 and 10M fiscal 2016, Ampang Point’s average occupancy rate (AOR) remained stable at 92%-94% while its average rental rate (ARR) improved to RM7.32–RM7.68 psf (2014: RM6.99 psf), resulting in an improved NPI margin of around 73% (2014: 69%). We note the Servicer’s ongoing efforts to create additional lettable space, improve the mall’s tenant mix and increase footfall, which have helped sustain its performance. That said, the healthier NPI margin in 10M fiscal 2016 was also a result of upward rental revision for 2 sponsor-related tenants (to reflect market rates) and the reapportionment of maintenance costs in October 2016 (applied retrospectively with effect from January 2016). On this note, we expect its finance service coverage ratio (FSCR) for the full year to be at around 1.60 times (above the covenanted level of 1.50 times), following the said rental revisions and cost adjustments. 

In the near term, rental upside will be limited given the more challenging operating environment. There will be a substantial incoming supply of new retail space over the next few years, although this may not pose direct competition to Ampang Point. To improve its operating efficiency, RM13 million of the issuance proceeds had initially been earmarked for the refurbishment of the Property. However, only RM0.4 million had been drawn from the Mall Refurbishment Account as at 25 November 2016, given the delay in executing its revised capex plans. 

Meanwhile, single-asset concentration risk remains one of the key moderating factors. There is also tenant-concentration risk; its top 4 tenants account for 17.5% of its gross rental income. Nonetheless, Ampang Point’s lease-maturity profile had improved y-o-y, with a respective 24%, 31% and 30% of its leases (by gross rental income) expiring in 2016, 2017 and 2018 as at end-August 2016. Correspondingly, its weighted-average lease expiry increased to 2.39 years as at the same date (2 July 2015: 2.02 years). Most of the leases that expired in 2016 were renewed, albeit mostly at the same rate. 

At the Servicer/the Originator level, we have noted that four key personnel have left the firm since the inception of the transaction in November 2015; the Servicer has since identified key personnel to better manage its roles and obligations under the transaction. The change raises concerns about servicing quality in terms of the Servicer’s familiarity and knowledge vis-à-vis its role and obligations in this transaction. On this note, the Issuer had been late in meeting the FSRA’s first monthly build-up (on top of the pre-funded reserves) for both the Senior Class and Class D Sukuk, as well as the first annual principal build-up in the Principal Reserve Account that fell due on 14 November 2016, by 1 and 9 business days, respectively, although subsequently remedied within the allowable period. The finalisation and submission of the Issuer’s audited accounts and management accounts for 1H fiscal 2016 had also been delayed. RAM will continue to closely monitor and observe the Servicer’s plans in ensuring continuous compliance to the terms of the transaction.

Analytical contact
Tan Han Nee
(603) 7628 1023
Hannee@ram.com.my

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