RAM Ratings reaffirms ratings of Quill Retail Malls’ RM350 mil sukuk, maintains negative outlook

Published on 10 Jul 2020.

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RAM Ratings has reaffirmed the respective ratings of Quill Retail Malls Sdn Bhd’s (QRMSB or the Issuer) RM350 mil Sukuk Murabahah (2017/2024), with a negative outlook (table below). The transaction is secured against Quill City Mall (QCM or the Property), a 777,967-sf shopping mall located along Jalan Sultan Ismail, with accessibility from Medan Tuanku Monorail Station.



Issue Amount
(RM million)

Expected Maturity

Legal Maturity

Class A



31 March 2022

29 March 2024

Class B



31 March 2022

29 March 2024

Class C



31 March 2022

29 March 2024

Class D



31 March 2022

29 March 2024


The negative outlook reflects our concerns over potential liquidity stress on the transaction in view of the interruptions to QCM’s turnaround plans, that have now been exacerbated by the Movement Control Order (MCO) to halt the spread of Covid-19. While the RM50 mil Bank Guarantee (BG) facility and six-month coupon reserve can at present adequately support the transaction up to its legal maturity date, weaker-than-expected cashflow and/or collections owing to curtailed businesses during various phases of the MCO, in the absence of further funding injections from the shareholder, will deplete the liquidity facility. 

The reaffirmation of the ratings is premised on the available collateral support provided by the Property that remains commensurate with the respective ratings. RAM had maintained the Property’s adjusted valuation at RM544.4 mil, which resulted in respective loan-to-value ratios of 36.7%, 47.8%, 51.4% and 53.3% for the Class A, Class B, Class C and Class D sukuk. These levels are lower relative to similar property-backed transactions with equivalent ratings, reflecting the weak performance of the Property and challenges in QCM’s path to recovery. Nevertheless, a downward reassessment of the Property’s adjusted valuation will be warranted should the fundamentals and/or liquidity of the retail property sector deteriorate further post-MCO. 
In 2019, QCM managed to secure the tenancy of JDX Presto Concept Store, the largest cashless concept store in the ASEAN region. Taking up 7% of the Property’s net lettable area (NLA) – partially occupying space surrendered by AEON Co (M) Bhd – the outlet is JDX Presto’s first online-to-offline store in Malaysia. Also on board were two other anchor tenants – Orange Esports and UniKL – which moved into the space vacated by Asia Music City Sdn Bhd. We understand that renovations for these tenants had resumed when the CMCO came into effect, after having been delayed by the MCO in March 2020. Based on the other newly committed leases shared by the management, the Property’s occupancy rate is expected to improve to 72% by end-2020 from 61% as at end-December 2019. However, given the market uncertainties and unprecedented events, we do not discount potential variations to these leases. 

QCM’s net property income (NPI) for FY Dec 2019 plummeted to RM0.73 mil (FY Dec 2018: RM6.19 mil). This is despite improved occupancy of 61.6% as at end-December 2019 (from close to 50%), as newly secured tenants were rent-free during the fit-out period. Going forward, the Property’s performance is envisaged to stay uncertain and volatile in view of the potential variation of newly committed leases, due to the MCO. QCM’s financial performance will also be affected by planned rental relief for tenants in “non-essential” sectors, although the actual quantum and duration of relief is still in the works. Additionally, 11% of QCM’s total gross rental income is derived from turnover rent, which is vulnerable to weak retail sales post-MCO, given subdued consumer sentiment. Based on our sensitivity analysis, the Property’s NPI is likely to fall into negative territory in FY Dec 2020, assuming two months of rental relief is provided to all tenants, which will necessitate further shareholder support. 


Analytical contact
Teoh Tze Yit
(603) 3385 2531

Media contact
Padthma Subbiah
(603) 3385 2577


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.

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