Published on 11 Jan 2019.
RAM Ratings has reaffirmed the AAA(fg)/AAA(bg)/Stable rating of Silver Sparrow Berhad’s (the Company) RM515 million Guaranteed MTN Programme (2011/2021). The enhanced rating reflects the irrevocable and unconditional guarantees extended by Danajamin Nasional Berhad (rated AAA/Stable/P1 by RAM), Malayan Banking Berhad (AAA/Stable/P1) and OCBC Bank (Malaysia) Berhad (AAA/Stable/P1) on a proportionate basis. Aseana Properties Limited (Aseana or the Group), via an unconditional and irrevocable corporate guarantee, undertakes to ensure that its wholly owned subsidiary, Silver Sparrow, meets its obligations under the Guaranteed IMTN Programme.
Aseana is a closed-end fund listed on the Main Market of the London Stock Exchange. The Group is principally involved in property development in Malaysia and Vietnam. Silver Sparrow had been incorporated as a funding vehicle to facilitate the issuance of the MTN Programme. The issuance proceeds had been used to refinance the borrowings of Silver Sparrow’s sister companies, as well as to part-finance the development of Sandakan Harbour Square, an integrated complex comprising Sandakan Harbour Mall and a four-star hotel – Four Points by Sheraton Sandakan – as well as to fund the acquisition of Aloft Kuala Lumpur Sentral. Following the extension of Aseana’s shelf life to December 2019, the Group’s shareholders will be given the option to vote for its continuation if its remaining assets are not divested by then.
The Group’s stand-alone credit profile remains weak as its remaining investment assets are still loss-making, despite some operational improvement in 1H FY Dec 2018. A lower y-o-y foreign-exchange translation gain also did not help to alleviate its operating loss. As such, the Group's operating cashflow fell back into deficit in 1H FY Dec 2018, thus severely weakening its debt coverage. Nevertheless, the Group’s revenue edged up 3.4% y-o-y to USD23.8 million in the same period (1H FY Dec 2017: USD23.0 million), attributable to the higher occupancy rate of Sandakan Harbour Mall, increased patient volumes for City International Hospital in Vietnam, and the sale of the remaining luxury condominium units at SENI Mont’ Kiara.
As at end-June 2018, the Group’s debt load had been reduced to USD91.6 million (end-December 2017: USD105.2 million), thereby easing its gearing level to 0.67 times (end-December 2017: 0.75 times). Aseana has rolled over its RM100 million (about USD25 million) of debt obligations under the Guaranteed MTN Programme - originally been slated to fall due in December 2018 - for another 12 months, and will keep doing so until its properties are divested. Moving forward, we anticipate the Group’s debt coverage to slowly recover as its assets register better operating performances in the medium term while it trims its borrowings through asset disposal.
On balance, Aseana benefits from the experience of its property manager, Ireka Development Management Sdn Bhd, a wholly owned subsidiary of Bursa Malaysia-listed Ireka Corporation Berhad (Ireka Corp). Ireka Corp has more than four decades’ experience in construction, property development and hospitality. Aseana has also formed strategic tie-ups with reputable firms in developing property projects in both Malaysia and Vietnam, primarily tapping its partners’ more visible branding, local market knowledge and extensive networks.
Yip Chee Meng
(603) 7628 1187
(603) 7628 1162
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Ratings on Silver Sparrow Berhad