MARC has placed Murud Capital Sdn Bhd’s debt ratings on MARCWatch Negative. Murud Capital currently has an outstanding RM279 million Senior Commercial Papers under the Senior Commercial Papers/Medium-Term Notes (Senior CP/MTN) programme of up to RM290 million. The programme is currently rated MARC-1/AA with a stable outlook.

The programme is secured by a first legal charge over Murud Capital’s Platinum Sentral, a commercial building with a net lettable area (NLA) of 476,370 sq ft that is located within the KL Sentral hub.

The MARCWatch Negative placement reflects heightened risk of weakening in Murud Capital’s net operating income (NOI) following a recently announced government plan to abolish the Land Public Transport Commission (SPAD). SPAD currently occupies 13.6% of the total net lettable area (NLA) of Platinum Sentral and contributes 14.7% of rental revenue per annum of the commercial building. As at end-2017, the collateral property had an occupancy rate of 98.2% and generated NOI of RM45.5 million for the year.

Notwithstanding the fact that Platinum Sentral is entitled to claim rental charges from SPAD over the remaining term of the lease period if the lease agreement is terminated, MARC is concerned that Platinum Sentral may find it challenging to find a replacement tenant given the prevailing oversupply of office space in KL. Moreover, potential tenants are likely to seek lower rental rates given that the average office rental rate within Kuala Lumpur city centre is lower compared to Platinum Sentral’s current average rate of RM9.09 psf.

Any material deterioration in Murud Capital’s NOI could potentially lead to a multi-notch downgrade. MARC will closely monitor Murud Capital’s progress of securing SPAD’s replacement, assess occupancy levels and other tenancy renewals. The rating agency will seek to resolve the MARCWatch placement within the next 90 days.

Contacts:
Chia Kah Yie, +03-2717 2961/ kahyie@marc.com.my;
David Lee, +03-2717 2955/ david@marc.com.my.