MARC has assigned ratings of AAA, AA and B- to Special Coral Sdn Bhd’s RM250.0 million Senior Class A Medium-Term Notes (MTN), RM50.0 million Senior Class B MTN and RM800.0 million Subordinated Class MTN under the existing RM1.1 billion MTN programme. The ratings carry a stable outlook. 

Proceeds from the Class A MTN issuance will be utilised to repay the maturing existing Class A MTN of RM200.0 million on March 31, 2020. The outstanding Subordinated Class MTN stood at RM506.3 million while there has been no drawdown under Class B MTN as at January 2, 2020.  

Special Coral owns about 91.6% of the retail strata area in Queensbay Mall, an eight-story shopping complex in Penang with a net lettable area (NLA) of 881,419 sq ft. The MTN are secured by a first legal charge over the strata titles of Queensbay Mall. 

The assigned ratings reflect the MTN classes’ loan-to-value (LTV) ratios which remain within the LTV benchmarks that MARC applies for the rating bands. The rating agency has valued the mall at RM644.4 million, which provides the Class A MTN, Class B MTN and Subordinated Class MTN with LTV ratios of 38.8%, 46.6% and 170.7%. The LTV ratios provide sufficient protection against collateral performance stress for the Senior Class MTN holders. The rating on the Subordinated Notes reflects their lower payment priority than the Senior Class MTN and that the coupon payments are deferrable and cumulative.

Queensbay Mall continued to record a high occupancy level of 99.7% and a commendable average rental rate of RM8.96 psf. Tenant concentration risk is low given its diversified tenancy profiles. Tenancy renewal risk is moderated by the management’s strong track record of achieving high tenant retention rates and the mall’s stable shopper traffic volume. Special Coral registered a 6.8% y-o-y growth in net operating income to RM78.6 million in 2019, translating to a debt service cover ratio of 6.98x and 5.71x for Class A and Class B MTN. 

Contact:
Lim Wooi Loon, +603-2717 2943/ wooiloon@marc.com.my.