RAM Ratings Assigns Final AA3/Stable Rating to SkyWorld Development-Sponsored Tranche 1 IMTN

Transcription

1. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications RAM​ ​Ratings​ ​Assigns​ ​Final​ ​AA3/Stable​ ​Rating to​ ​SkyWorld​ ​Development-Sponsored​ ​Tranche 1​ ​IMTN 04​ ​December​ ​2017 RAM​ ​Ratings​ ​has​ ​assigned​ ​a​ ​final​ ​AA3/Stable​ ​rating​ ​to​ ​SkyWorld​ ​Capital​ ​Berhad's​ ​(the​ ​Issuer​ ​or SkyWorld​ ​Capital)​ ​RM50​ ​million​ ​first​ ​issuance​ ​(Tranche​ ​1​ ​IMTN)​ ​under​ ​its​ ​RM600​ ​million​ ​IMTN Sukuk​ ​Musharakah​ ​Programme​ ​(IMTN​ ​Programme).​ ​Under​ ​this​ ​programme,​ ​SkyWorld Development​ ​Sdn​ ​Bhd​ ​(SkyWorld)​ ​or​ ​its​ ​subsidiaries​ ​will,​ ​from​ ​time​ ​to​ ​time,​ ​sell​ ​ ​to​ ​SkyWorld Capital​ ​-​ ​their​ ​beneficial​ ​interest​ ​under​ ​the​ ​respective​ ​sale​ ​and​ ​purchase​ ​agreements​ ​(SPAs) signed​ ​with​ ​the​ ​buyers​ ​of​ ​specific​ ​property​ ​development​ ​projects.​ ​SkyWorld​ ​Capital​ ​is​ ​a subsidiary​ ​and​ ​special-purpose​ ​funding​ ​vehicle​ ​for​ ​SkyWorld.​ ​The​ ​future​ ​receipts​ ​under​ ​the SPAs​ ​will​ ​be​ ​used​ ​to​ ​fund​ ​the​ ​remaining​ ​construction​ ​costs​ ​related​ ​to​ ​the​ ​identified​ ​projects,​ ​as well​ ​as​ ​to​ ​meet​ ​the​ ​Issuer's​ ​fees,​ ​expenses​ ​and​ ​obligations​ ​under​ ​each​ ​sukuk. Concurrently,​ ​the​ ​Issuer​ ​will​ ​also​ ​undertake​ ​an​ ​unrated​ ​RM400​ ​million​ ​ICP​ ​Sukuk​ ​Murabahah Programme​ ​ ​structured​ ​to​ ​act​ ​as​ ​a​ ​contingent​ ​line​ ​for​ ​its​ ​respective​ ​projects.​ ​This​ ​includes contingencies​ ​arising​ ​from​ ​shortfalls​ ​in​ ​the​ ​profit​ ​payment​ ​and​ ​senior​ ​expenses​ ​in​ ​respect​ ​of​ ​the relevant​ ​tranche​ ​of​ ​the​ ​Sukuk​ ​Musharakah,​ ​construction​ ​cost​ ​overruns​ ​and/or​ ​timing mismatches​ ​between​ ​the​ ​project's​ ​development​ ​costs​ ​and​ ​the​ ​expected​ ​progress​ ​payments.​ ​All ICP​ ​issued​ ​pursuant​ ​to​ ​the​ ​relevant​ ​Tranche​ ​IMTNs​ ​will​ ​be​ ​fully​ ​underwritten​ ​and​ ​guaranteed. For​ ​the​ ​Tranche​ ​1​ ​IMTN,​ ​the​ ​ICP​ ​has​ ​been​ ​sized​ ​at​ ​RM41.0​ ​million​ ​(Tranche​ ​1​ ​ICP);​ ​it​ ​will​ ​be guaranteed​ ​by​ ​Danajamin​ ​Nasional​ ​Berhad​ ​(rated​ ​AAA/Stable/P1)​ ​and​ ​underwritten​ ​by​ ​Alliance Investment​ ​Bank​ ​Berhad​ ​(rated​ ​A1/Stable/P1). SkyWorld's​ ​IMTN​ ​Programme​ ​is​ ​the​ ​first​ ​sukuk​ ​to​ ​monetise​ ​unbilled​ ​sales​ ​for​ ​executed​ ​property transactions,​ ​and​ ​the​ ​first​ ​to​ ​involve​ ​affordable​ ​housing.​ ​RAM​ ​has​ ​assigned​ ​the​ ​AA3​ ​rating​ ​after analysing​ ​the​ ​transaction​ ​structure​ ​and,​ ​in​ ​particular,​ ​considering​ ​the​ ​sukuk​ ​holders'​ ​ability​ ​to replace​ ​the​ ​contractor​ ​-​ ​to​ ​ensure​ ​the​ ​underlying​ ​development​ ​project​ ​is​ ​completed.​ ​This, together​ ​with​ ​the​ ​strong​ ​underlying​ ​local​ ​housing​ ​laws​ ​and​ ​other​ ​structural​ ​features​ ​available​ ​as well​ ​as​ ​the​ ​solid​ ​project​ ​economics,​ ​allow​ ​SkyWorld​ ​Capital​ ​to​ ​promptly​ ​meet​ ​ongoing development​ ​expenses​ ​as​ ​well​ ​as​ ​the​ ​periodic​ ​profit​ ​payments​ ​and​ ​principal​ ​obligations.​ ​The Tranche​ ​1​ ​IMTN​ ​is​ ​secured​ ​against​ ​1,260​ ​SPAs​ ​executed​ ​for​ ​a​ ​yet-to-be-completed​ ​mixed development​ ​project​ ​comprising​ ​4​ ​residential​ ​towers​ ​and​ ​60​ ​commercial​ ​units​ ​of​ ​the​ ​SkyAwani development​ ​in​ ​Sentul,​ ​with​ ​an​ ​unbilled​ ​value​ ​of​ ​RM151​ ​million.​ ​The​ ​project​ ​is​ ​built​ ​by​ ​Citra Amal​ ​Sdn​ ​Bhd​ ​ ​a​ ​wholly​ ​owned​ ​subsidiary​ ​of​ ​SkyWorld.​ ​The​ ​SkyAwani​ ​residential​ ​component​ ​is a​ ​Rumah​ ​Mampu​ ​Milik​ ​Wilayah​ ​Persekutuan​ ​(RUMAWIP)​ ​project,​ ​an​ ​affordable​ ​housing
2. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications scheme​ ​with​ ​a​ ​ceiling​ ​price​ ​of​ ​RM300,000​ ​-​ ​markedly​ ​lower​ ​than​ ​those​ ​of​ ​comparable​ ​properties nearby. Based​ ​on​ ​SkyAwani's​ ​estimated​ ​remaining​ ​gross​ ​development​ ​profit​ ​of​ ​RM40.7​ ​million​ ​to​ ​be collected​ ​within​ ​the​ ​sukuk's​ ​tenure​ ​and​ ​the​ ​available​ ​cash​ ​in​ ​the​ ​relevant​ ​accounts,​ ​this translates​ ​into​ ​a​ ​32.7%​ ​overcollateralisation​ ​ratio​ ​for​ ​the​ ​Tranche​ ​1​ ​IMTN.​ ​This​ ​level​ ​of​ ​credit enhancement​ ​supports​ ​the​ ​adequacy​ ​of​ ​the​ ​cashflow​ ​under​ ​stressed​ ​scenarios​ ​-​ ​mitigating against​ ​buyer​ ​defaults​ ​and​ ​softer​ ​property​ ​prices​ ​in​ ​the​ ​event​ ​of​ ​recoveries​ ​-​ ​that​ ​commensurate with​ ​an​ ​AA3​ ​scenario.​ ​RAM's​ ​applied​ ​default​ ​frequencies​ ​reflect​ ​the​ ​high​ ​proportion​ ​of​ ​the​ ​units that​ ​have​ ​already​ ​been​ ​sold​ ​(residential:​ ​100%)​ ​and​ ​end-financed​ ​(residential:​ ​96.33%; commercial:​ ​88.24%)​ ​as​ ​at​ ​31​ ​October​ ​2017.​ ​Of​ ​the​ ​end-financed​ ​units,​ ​11.3%​ ​are​ ​serviced through​ ​government​ ​staff​ ​salary​ ​deductions.​ ​These​ ​factors​ ​substantially​ ​reduce​ ​the​ ​buyers' default​ ​risk​ ​on​ ​progress​ ​payments. The​ ​transaction​ ​also​ ​incorporates​ ​the​ ​appointment​ ​of​ ​an​ ​independent​ ​project​ ​certifier​ ​(IPC)​ ​to ensure​ ​the​ ​project's​ ​performance​ ​remains​ ​on​ ​track​ ​and​ ​within​ ​budget.​ ​Based​ ​on​ ​the​ ​latest construction​ ​progress​ ​report,​ ​SkyAwani​ ​is​ ​more​ ​than​ ​70%​ ​completed​ ​and​ ​has​ ​already​ ​achieved topping-up,​ ​thus​ ​significantly​ ​reducing​ ​the​ ​risk​ ​of​ ​delays​ ​and​ ​cost​ ​overruns.​ ​Against​ ​the​ ​Tranche 1​ ​IMTN's​ ​expected​ ​maturity​ ​and​ ​SkyAwani's​ ​targeted​ ​vacant​ ​possession​ ​(VP)​ ​in​ ​May​ ​2019, there​ ​is​ ​a​ ​considerable​ ​9-month​ ​time​ ​buffer​ ​given​ ​the​ ​developer's​ ​targeted​ ​VP​ ​in​ ​August​ ​2018. SkyWorld​ ​is​ ​a​ ​relative​ ​newcomer​ ​to​ ​the​ ​property​ ​sector,​ ​with​ ​a​ ​limited​ ​track​ ​record.​ ​Since​ ​its rebranding​ ​in​ ​2013,​ ​it​ ​has​ ​chalked​ ​up​ ​a​ ​RM1.97​ ​billion​ ​of​ ​upcoming​ ​project​ ​launches​ ​(based​ ​on gross​ ​development​ ​value​ ​(GDV)),​ ​deliverable​ ​over​ ​the​ ​next​ ​4​ ​years​ ​ ​a​ ​target​ ​we​ ​view​ ​to​ ​be ambitious.​ ​Excluding​ ​SkyAwani,​ ​SkyWorld​ ​currently​ ​has​ ​3​ ​other​ ​ongoing​ ​projects​ ​and​ ​recently completed​ ​its​ ​first​ ​one,​ ​3​ ​months​ ​ahead​ ​of​ ​schedule.​ ​As​ ​at​ ​end-September​ ​2017,​ ​SkyWorld's respective​ ​gearing​ ​and​ ​OPBDIT​ ​debt​ ​coverage​ ​ratios​ ​stood​ ​at​ ​0.97​ ​and​ ​0.76​ ​times​ ​ ​which​ ​we expect​ ​will​ ​likely​ ​be​ ​maintained​ ​in​ ​the​ ​medium​ ​term,​ ​based​ ​on​ ​its​ ​current​ ​pace​ ​of​ ​expansion. That​ ​said,​ ​each​ ​of​ ​its​ ​property​ ​launches​ ​has​ ​achieved​ ​strong​ ​take-up​ ​rates​ ​within​ ​a​ ​short​ ​period, providing​ ​upside​ ​potential​ ​to​ ​its​ ​financial​ ​metrics​ ​as​ ​its​ ​existing​ ​developments​ ​approach completion. RAM​ ​will​ ​monitor​ ​this​ ​transaction​ ​on​ ​a​ ​monthly​ ​basis,​ ​and​ ​will​ ​rely​ ​on​ ​the​ ​periodic​ ​reports prepared​ ​by​ ​the​ ​project​ ​manager,​ ​the​ ​IPC​ ​and​ ​the​ ​architects,​ ​to​ ​some​ ​extent.​ ​As​ ​such,​ ​any variation​ ​or​ ​misrepresentation​ ​by​ ​the​ ​professionals​ ​may​ ​lead​ ​to​ ​cost​ ​overruns​ ​or​ ​timing​ ​delays beyond​ ​the​ ​scenarios​ ​assumed​ ​in​ ​our​ ​analysis.​ ​For​ ​more​ ​details​ ​on​ ​RAM's​ ​rating​ ​approach, please​ ​refer​ ​to​ ​our​ ​publication​ ​Credit​ ​FAQs:​ ​SkyWorld​ ​Capital's​ ​Debut​ ​Sukuk​ ​Financing available​ ​here. Organisation​ ​Name: RAM​ ​Rating​ ​Services​ ​Berhad
3. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications News​ ​Type: RATING​ ​ANNOUNCEMENT Source: BNM​ ​Announcements Media​ ​Contact Padthma​ ​Subbiah (603)​ ​7628​ ​1162 padthma@ram.com.my Disclaimer: The​ ​credit​ ​rating​ ​is​ ​not​ ​a​ ​recommendation​ ​to​ ​purchase,​ ​sell​ ​or​ ​hold​ ​a security,​ ​inasmuch​ ​as​ ​it​ ​does​ ​not​ ​comment​ ​on​ ​the​ ​security's​ ​market price​ ​or​ ​its​ ​suitability​ ​for​ ​a​ ​particular​ ​investor,​ ​nor​ ​does​ ​it​ ​involve​ ​any audit​ ​by​ ​RAM​ ​Ratings.​ ​The​ ​credit​ ​rating​ ​also​ ​does​ ​not​ ​reflect​ ​the legality​ ​and​ ​enforceability​ ​of​ ​financial​ ​obligations. RAM​ ​Ratings​ ​receives​ ​compensation​ ​for​ ​its​ ​rating​ ​services,​ ​normally paid​ ​by​ ​the​ ​issuers​ ​of​ ​such​ ​securities​ ​or​ ​the​ ​rated​ ​entity,​ ​and sometimes​ ​third​ ​parties​ ​participating​ ​in​ ​marketing​ ​the​ ​securities, insurers,​ ​guarantors,​ ​other​ ​obligors,​ ​underwriters,​ ​etc.​ ​The​ ​receipt​ ​of this​ ​compensation​ ​has​ ​no​ ​influence​ ​on​ ​RAM​ ​Ratings'​ ​credit​ ​opinions or​ ​other​ ​analytical​ ​processes.​ ​In​ ​all​ ​instances,​ ​RAM​ ​Ratings​ ​is committed​ ​to​ ​preserving​ ​the​ ​objectivity,​ ​integrity​ ​and​ ​independence​ ​of its​ ​ratings.​ ​Rating​ ​fees​ ​are​ ​communicated​ ​to​ ​clients​ ​prior​ ​to​ ​the issuance​ ​of​ ​rating​ ​opinions.​ ​While​ ​RAM​ ​Ratings​ ​reserves​ ​the​ ​right​ ​to disseminate​ ​the​ ​ratings,​ ​it​ ​receives​ ​no​ ​payment​ ​for​ ​doing​ ​so,​ ​except for​ ​subscriptions​ ​to​ ​its​ ​publications. Similarly,​ ​the​ ​disclaimers​ ​above​ ​also​ ​apply​ ​to​ ​RAM​ ​Ratings' credit-related​ ​analysis​ ​and​ ​commentaries,​ ​where​ ​relevant.