RAM Ratings reaffirms enhanced AAA ratings of Silver Sparrow’s guaranteed MTN

Published on 07 Jan 2021.

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RAM Ratings has reaffirmed the AAA(fg)/AAA(bg)/Stable ratings of Silver Sparrow Berhad’s RM515 mil Guaranteed MTN Programme (2011/2021). The ratings reflect 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 the MTN, in accordance with their agreed proportions. 

Silver Sparrow is a special-purpose vehicle set up as a funding conduit to issue the MTN. It is wholly owned by Aseana Properties Limited (Aseana or the Group), a closed-end fund listed on the London Stock Exchange. The Group’s business model had earlier been to acquire, develop and redevelop upscale residential, commercial and hospitality projects in Malaysia and Vietnam. It has now ceased its acquisitions and will focus on improving the operating performance of its completed projects and disposing of its assets. Under the transaction, Aseana has extended an unconditional and irrevocable corporate guarantee to the guarantors on the repayment of the MTN. Given Aseana’s undertaking, Silver Sparrow’s ratings essentially reflect the credit fundamentals of the Group.  

Aseana’s stand-alone credit profile has weakened as its loss-making investment assets have been hit hard by the effects of the COVID-19 pandemic. To reduce cash burn, Aseana had decided to permanently close the Four Points by Sheraton Sandakan hotel (Four Points) in May 2020. RuMa Hotel and Residence (RuMa) in Kuala Lumpur, which had been shuttered since March amid the Movement Control Order (MCO), reopened in October 2020. It posted a very weak average occupancy rate (AOR) of just 11% for the month. The various stages of the MCO have also weighed heavily on footfall at Harbour Mall Sandakan. As at end-November 2020, the mall’s visitors had halved compared to pre-MCO levels.  Similarly, the operating performance of City International Hospital (CIH) in Vietnam has been adversely affected; patients have been delaying non-urgent procedures or elective surgeries for fear of infection by the coronavirus. 

As at end-June 2020, the Group’s debt level stayed relatively stable at USD102.41 mil (end-December 2019: USD100.4 mil). That said, deeper accumulated losses had pushed its gearing ratio up to 1.08 times (end-December 2019: 0.95 times). In 1H FY Dec 2020, Aseana’s FFODC remained negative due to its persistent operating losses. The repayment of its debts depends much on asset divestment. Aseana expects to repay the MTN via proceeds from the disposal of Harbour Mall and Four Points, which had a combined net asset value of USD58.14 mil as at end-December 2019. This covers 2.32 times the value of its outstanding MTN. All said, we remain cautious about the property market’s bleak prospects amid the pandemic.

Aseana’s RM100.0 mil (about USD25.0 mil) of outstanding MTN that fell due in December 2020 has been rolled over until 8 December 2021. If Aseana fails to divest its remaining assets in the next few quarters, the outstanding MTN will have to be refinanced to avert a default as it will expire in December 2021.

On 30 June 2019, Ireka Development Management Sdn Bhd ceased to be the Group’s development manager. Since its termination, the management of Aseana has been internalised. The Group is in the process of demerging from Ireka Corporation Berhad, Legacy Essence Limited and other shareholders, which collectively own about 50% Aseana. The demerger exercise is likely to entail an in-specie distribution of RuMa and one plot of land in Kota Kinabalu to the departing shareholders. Post-demerger, the Group will be left with Harbour Mall, Four Points and CIH. The demerger is still pending approval from the lenders. If the exercise is successful, the disposal of RuMa is expected to reduce Aseana’s cash burn and debt load. 


Analytical contact
Wong Ee Loo
(603) 3385 2521

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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