MARC downgrades YNH's sukuk to BBIS, with negative outlook

• The downgrade was made as MARC removed the programme from its negative watch, in which it has been placed since Jan 18 due to YNH's weak financial position, delayed asset disposals and material issues concerning its key shareholder that have compounded the challenges that the group faces to address its weakening credit profile, MARC said in a statement.

KUALA LUMPUR (June 27): MARC Ratings Bhd has downgraded YNH Property Bhd's (KL:YNHPROP) Islamic Medium-Term Notes Programme (Sukuk Wakalah) to BBIS with a negative outlook in a move that it says reflects heightening concerns over the group's business and financial prospects.

The downgrade was made as MARC removed the programme from its negative watch, in which it has been placed since Jan 18 due to YNH's weak financial position, delayed asset disposals and material issues concerning its key shareholder that have compounded the challenges that the group faces to address its weakening credit profile, MARC said in a statement.

“Since the negative placement in January, the rating agency notes that YNH has not made any meaningful progress that would have alleviated concerns about its ability to meet its upcoming financial obligations,” said MARC.

YNH has an outstanding RM323 million under sukuk programme, of which the first tranche of RM153 million will mature on Feb 28, 2025. It is required to build up 50% of this amount through monthly payments of RM6.1 million into a reserve account from Feb 28, 2024.

However, YNH has struggled to meet this commitment, periodically lapsing into technical defaults, underscoring its weak liquidity position, according to MARC.

As of end-March, the company had RM13 million in cash and short-term deposits, while its total group borrowings amounted to RM1.2 billion, the rating agency said.

“While the visibility of progress billings from few ongoing property developments remains modest at this juncture, the rating agency understands from YNH that sales performance of its Solasta project is improving.

“Should this trend continue, coupled with an accelerated pace to conclude its asset disposal plans including the sale of the 5.1-acre land parcel in Desa Sri Hartamas and 163 Retail Park mall in Mont Kiara, YNH would be better placed to improve its financial position. The rating agency will continue to monitor developments in YNH to take appropriate rating action,” MARC added.

However, the sale of both its 163 Retail Park and the 5.098-acre freehold land in Desa Sri Hartamas to Sunway Group are facing delays.

In a filing with Bursa Malaysia on Thursday, YNH said the conditional period of the sale and purchase agreement for the sale of 163 Retail Park to Sunway Real Estate Investment Trust (Sunway REIT) (KL:SUNREIT) has been extended by three months to Sept 26. The conditional period ended on Thursday (June 26). This is the second extension for the deal.

The deadline of YNH's RM170 million sale of the Desa Sri Hartamas land to Sunway Bhd (KL:SUNWAY) has also been postponed by a year to May 12, 2025, according to the group's bourse filing announced last month.  The delay, which was the fifth time for the deal, was due to more conditions being added to the deal following the discovery of a registered caveat lodged over the property.

YNH again came under the spotlight on Wednesday as the Securities Commission Malaysia is suing the group’s largest shareholder, Datuk Dr Yu Kuan Chon, for alleged market rigging and manipulation involving shares of Shangri-La Hotels (M) Bhd (KL:SHANG) in 2018.

Following the news, YNH's shares tumbled 11 sen or 18.2% to 49.5 sen on Thursday, giving the group a market capitalisation of RM262 million.

Trading volume swelled to 94.44 million shares, exceeding its 200-day average trading volume of 13.55 million shares — making it the second most active counter on Bursa Malaysia.    

Looking to buy a home? Sign up for EdgeProp START and get exclusive rewards and vouchers for ANY home purchase in Malaysia (primary or subsale)!