RAM Ratings reaffirms AAA/Stable rating of Eternal Icon’s Plaza 33-backed Senior MTN

Published on 08 Apr 2021.

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RAM Ratings has reaffirmed the AAA/Stable rating of the RM87.00 mil Senior Medium-Term Notes (MTN) under Eternal Icon Sdn Bhd’s (EISB or the Issuer) 400 million MTN Programme. The reaffirmation reflects our expectation that Plaza 33’s (the Property) cashflow performance will recover closer to our projections over the near term despite a temporary interruption in 2021 before replacements are secured for spaces vacated amid a challenging operating environment, exacerbated by the Covid-19 pandemic. 

Plaza 33’s net property income of RM25.92 mil for FY Dec 2020 remains above our sustainable cashflow assumption of RM25.0 mil. Cost-cutting measures and a higher rental reversion rate in 2019 had cushioned the effect of rental rebates (RM1.04 mil) and reduced car park income (about RM1.4 mil lower), given various Covid-19 restrictions. Going forward, however, we envisage Plaza 33’s cashflow to weaken in 2021 due to the non-renewal/downsizing of some leases, before recovering to our expectations in the next two years. As we have maintained our sustainable cashflow assumption for the Property, the resultant adjusted valuation (RM263.2 mil) continues to afford superior credit support for the rating. Notably, the transaction’s low leverage and strong cashflow coverage provide additional room to cushion further pandemic-related stress, if any. 

As at end-December 2020, the Property’s occupancy rate stood at 88% owing to some non-renewals. As such, Plaza 33’s top three tenants accounted for a larger share of 47.0% of total net lettable area (NLA), contributing 40.7% of rental income (end-December 2019: 43.3% and 38.5%, respectively). Plaza 33’s moderately spread lease maturity profile, however, tempers this concentration. With leases for a respective 30%, 22% and 42% of total NLA expiring in 2021, 2022 and 2023, the weighted-average lease expiry stood at 1.64 years as at end-December 2020. 

For 2021, two tenants have indicated an intention either not to renew or to downsize their leases (about 6% of NLA). While remaining tenants plan to renew or are in negotiation, we do not rule out further non-renewal/downsizing. That said, the management will prioritise maintaining occupancy over rental, if required, in view of the difficult operating environment. Although we note interest shown by several prospective tenants since end-2020, discussions have been muted since Movement Control Order 2.0 came into effect. Plaza 33 faces competition from new developments in the vicinity such as Symphony Square (completed in 2019) and Pacific Star Business Hub (completed in 2020), which boast similar features. The Property’s asking rates currently range from RM4.50 psf-RM4.80 psf, compared to its RM4.96 psf average rental rate last year.

Under the MTN Programme of up to RM400.00 mil, RM86.00 mil of Senior MTN and RM254.00 mil 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. Principal redemption is expected to be funded by exercising the Property Call Option under the Programme upon the Senior MTN’s expected maturity 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
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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