MARC revises Tropicana's sukuk outlook to negative

KUALA LUMPUR (Feb 16): Malaysian Rating Corp Bhd (MARC) has revised the outlook for Tropicana Corp Bhd's RM1.5 billion sukuk wakalah and RM2 billion perpetual sukuk programmes to negative from stable, while maintaining the A+IS and A/S ratings.

In a statement, MARC said the revised outlook reflects its increasing concern over the rise in Tropicana's borrowings, which stood at RM4.5 billion (including the outstanding perpetual sukuk) as at end-September 2021 from RM2.8 billion when the initial rating was assigned in April 2020.

The rating agency noted that Tropicana indicated in April 2020 that any increase in borrowings would be mitigated by proceeds from asset disposals.

"MARC Ratings notes that the planned disposals have not materialised as at date, although we understand that the group is making efforts to finalise some disposals by mid-2022.

"As a result of the increase in borrowings, the group's coverage metrics have weakened," said MARC analysts Lim Wooi Loon, Umar Abdul Aziz and Taufiq Kamal.

MARC said it remains mindful that the outlook for the domestic property industry remains challenging while highlighting that developments that have long gestation periods are also exposed to project risks.

The agency said it will undertake a full rating review upon the release of the group's 2021 audited financial accounts.

It said the rating could be lowered if there is no material development to mitigate the impact of the increase in group borrowings on its balance sheet.

"Conversely, among other factors, a clear improvement in the group's financial metrics could lead to the rating outlook to be revised back to stable," said MARC.

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