MARC Ratings downgrades YNH’s IMTN programme rating

KUCHING: MARC Ratings has downgraded its rating on YNH Property Bhd’s (YNH) Islamic Medium-Term Notes Programme (Sukuk Wakalah) to BBB+IS from AIS and concurrently placed the rating on MARCWatch Negative.

In a statement, it explained that the downgrade reflects the heightened concerns on YNH’s weak liquidity position vis-à-vis its financial obligations, compounded by further delays in sale of assets that would have provided a much-needed cash infusion.

It also pointed out that the group liquidity position as reflected by cash and shortterm deposits stood at about RM17 million as at September 30, 2023 (1QFY24) while adjusted borrowings, including the outstanding under the rated Sukuk Wakalah of RM323 million and perpetual sukuk of RM345.9 million, amounted to about RM1.3 billion. The first tranche of RM153 million under the Sukuk Wakalah will mature on February 28, 2025, for which YNH has to build up four per cent or RM6.1 million per month from February 2024 onwards.

“In the near term, cash flow would remain modest given the group has only a few projects, of which the ongoing Solasta Dutamas, a highrise residential development in Mont Kiara with a gross development value (GDV) of RM770 million accounts for the bulk of its total GDV,” it said.

The rating agency also opined that the group’s further plans to launch other property projects would be impeded by its tight liquidity position. Had the assets disposals – involving a 5.1-acre parcel, the 163 Retail Park shopping centre in Mont Kiara and AEON Seri Manjung in Perak – completed as planned, YNH would have received total proceeds of about RM590 million.

The rating agency viewed that material issues faced by YNH management and key shareholder may have contributed to the slowerthan-expected progress on asset monetisation and the weakening of its business profile.

“Among these issues were the need to appoint new external auditors and an audit committee chairman as both did not seek reappointment in December 2023, and appointing an independent party to review past transactions related to some joint-venture and turnkey agreements, aimed at enhancing governance.

“Furthermore, the significant decline in YNH’s share price in recent weeks would have placed additional liquidity pressures on the key shareholder,” it said.

It noted that it has been informed that YNH management is addressing these issues; an announcement pertaining to new auditors and other appointments is expected to be made imminently.

The MARCWatch Negative placement reflects the significant challenges YNH faces in addressing these issues including implementing a turnaround strategy to improve its business and credit profile. The placement would be uplifted if YNH makes meaningful progress; however, should performance continue to worsen, the rating would be subjected to further downgrades.