KUALA LUMPUR: MARC Ratings Bhd has lowered its rating on YNH Property Bhd's sukuk wakalah to BBB+IS and placed it under MARCWatch Negative on heightened concerns over its weak liquidity position with the delay in sale of assets, which would have provided much needed cash.
The news comes after Bursa Malaysia Securities Bhd froze the lower limit for YNH Property's share price to RM1.22 after it lost more than 50 per cent of its share price value.
MARC said the financial challenges have been exacerbated by additional delays in the sale of assets, which were expected to inject much-needed cash.
According to MARC in a statement, as of September 30, 2023, YNH's liquidity, represented by cash and short-term deposits of RM17 million in the first quarter of the financial year 2024 (1QFY2024). Meanwhile, adjusted borrowings, including outstanding Sukuk Wakalah of RM323 million and perpetual sukuk of RM345.9 million, totaled around 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 4 per cent or RM6.1 million per month from February 2024 onwards.
The rating agency suggests the challenges faced by YNH management and a key shareholder might have contributed to slower-than-anticipated progress in asset monetisation and a deterioration in the company's business profile.
"Notable issues include the necessity to appoint new external auditors and an audit committee chairman, as both chose not to seek reappointment in December 2023. "Additionally, an independent party is being appointed to review past transactions related to certain joint ventures and turnkey agreements, with the aim of improving governance," MARC said.
"The substantial decline in YNH's share price in recent weeks could also have imposed added liquidity pressures on the key shareholder," it added.
MARC Ratings 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.
MARC anticipates YNH' cash flow to be limited as it currently has only a few projects.
The primary contributor to its total gross development value (GDV) is the ongoing Solasta Dutamas project in Mont Kiara, valued at RM770 million.
Additionally, the rating agency believes that the company's tight liquidity will hinder its ability to launch additional property projects.
"If the planned asset disposals, involving a 5.1-acre parcel, the 163 Retail Park shopping centre in Mont Kiara, and AEON Seri Manjung in Perak, had been completed as scheduled, YNH would have received approximately RM590 million in total proceeds," it added.
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.
MARC's action comes after Bursa Securities' unearth an oversight on YNH Property Bhd's part in not announcing a planned acquisition of a 2.06 hectare site in Desa Hartamas, Kuala Lumpur for RM150 million.
When queried by Bursa Malaysia Securities Bhd on an announcement made in May 2023 that its subsidiary Kar Sin Bhd is to dispose of land in Desa Hartamas for RM170 million to Sunway Living Space Sdn Bhd, YNH Property said not announcing the proposed acquisition of the Desa Hartamas land from Great Wall Park Sdn Bhd (GWP) was an oversight on its part.