Find A Rating 
PRESS RELEASES
Eternal Icon
Published on 28 Mar 2019.
RAM Ratings has reaffirmed the AAA/Stable rating of Eternal Icon Sdn Bhd’s (EISB or the Issuer) RM87.0 million Senior MTN, given that the notes are supported by a loan-to-value ratio of 33.1% and debt service coverage ratio of 3.38 times that remain commensurate with the rating. The Senior MTN is secured against Plaza 33, a multi-level office building comprising two towers, in the commercial district of Section 13 in Petaling Jaya, Selangor. The stable outlook reflects our expectations that Plaza 33’s (the Property) performance will stay stable despite a challenging operating environment, backed by near-full occupancy and still competitive rental rates. In FY Dec 2018, the Property recorded a net property income (NPI) of RM25.90 million, marginally above our sustainable cashflow assumption of RM25 million per annum. Plaza 33’s performance in FY Dec 2018 also reflected additional rental income from the newly created net lettable area (NLA) on Tower A’s rooftop and additional NLA following the acquisition of Level 13 in September 2018.
The Senior MTN is also supported by structural features of the transaction such as a cash diversion mechanism to trap rental income and a pre-funded reserve to ensure sufficient liquidity to meet obligations under the Issuer’s 15-year MTN Programme during the disposal period, if a Trigger Event were to occur. The early disposal of Plaza 33 will be triggered if the Property fails to meet certain performance benchmarks, with the proceeds used to meet the repayment of the MTN. During the review period, the Property’s NPI was comfortably above the minimum requirement of RM15 million. We note that the staggered maturity of the Senior MTN moderates balloon risk to a certain degree.
All said, single-asset concentration risk continues to be a key moderating factor. Tenant concentration risk also remains pronounced as the Property’s top three tenants occupied 52.7% of total NLA as at end-December 2018, contributing 40.7% of monthly rental income. The risk is, however, partly mitigated by the quality of Plaza 33’s lease profile as well as the respectable rental renewals and reversion observed to date. The Property’s lease maturity profile is moderately spread, with leases for a respective 29%, 39% and 32% of total NLA expiring in 2019, 2020 and 2021. We have maintained our view that Plaza 33’s asset quality is above average, as reflected in its RAM Property Score of O-3.65, out of a maximum of O-5.00.
Under the MTN Programme of up to RM400.0 million, RM86.0 million of Senior MTN and RM220.0 million of Sub-MTN have been issued to date. EISB will use net rental collections from the Property to meet coupon obligations in respect of the Senior MTN. The principal redemption is envisaged to be funded by exercising the Property Call Option under the Programme upon the expected maturity of the Senior MTN or by refinancing the Senior MTN through the issuance of Sub-MTN, failing which, via the sale of the Property by the Security Trustee.
Analytical contact
Lim Chern Yit
(603) 3385 2528
chernyit@ram.com.my
Media contact
Padthma Subbiah
(603) 3385 2577
padthma@ram.com.my
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 analyses and commentaries, where relevant.
Published by RAM Rating Services Berhad
© Copyright 2019 by RAM Rating Services Berhad
