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

Published on 16 Mar 2022.

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RAM Ratings has reaffirmed the AAA/Stable rating of the RM87.0 mil Senior Medium-Term Notes (MTN) under Eternal Icon Sdn Bhd’s (EISB or the Issuer) RM400 mil MTN Programme. 

The reaffirmation is premised on our view that Plaza 33’s (the Property) performance will stay healthy despite the effects of a prolonged pandemic and continue to provide superior credit support to amply uphold the issue rating. Taking into consideration the soft office market environment, competition in the vicinity and lease non-renewal/downsizing in 2022, we have revised our sustainable cashflow assumption for the Property from RM25.0 mil to RM22.0 mil per annum. The resultant loan to value ratio of 37.6% and stressed debt service coverage ratio of 2.97 times remain superior for the rating. 

In FY Dec 2021, Plaza 33’s net property income was a lower RM22.3 mil y-o-y (FY Dec 2020: RM25.9 mil) owing to higher rental rebates (+0.5%) and lower occupancy (-9.8%). Car park income which makes up about 10% of total income was also down, sinking 22.7%. As the pandemic continues to exert pressure on occupancy and rental rates in the near term, Plaza 33’s cashflow performance is envisaged to weaken in 2022 (circa RM18 mil) before showing gradual recovery over the next three years (RM20.0 mil-RM23.0 mil). 

Our assessment factors in the Property’s potential extended appeal to a wider range of tenants including multinational corporations, given its impending gold Leadership in Energy and Environmental Design (or LEED) status – expected to be received in 1H 2022 – as well as minor refurbishments/refreshments. Plaza 33 considers various strategies like flexible lease terms, reduced rental rates and fitted office offerings to remain competitive.

As at end-December 2021, the Property was still exposed to considerable tenant concentration risk as its top three tenants occupied 49.1% of total net lettable area (NLA), contributing 43.8% of rental income (end-December 2020: 47.0% and 40.7%, respectively). Leases for a respective 43.0% and 48.0% of NLA will expire in 2022 and 2023, giving rise to significant tenancy renewal risk. Of the leases expiring this year, those for 29% of NLA are to be renewed while leases for 34.0% are being negotiated. The termination of expiring leases for the remaining 37.0% of NLA will be moderated by two new tenancies secured by Plaza 33. Going forward, we draw comfort from the management’s competencies in ensuring the Property remains appealing to prospective and existing tenants amid stiff competition among Grade A offices in the vicinity.

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 the exercise of a Property Call Option upon the Senior MTN’s expected maturity or by refinancing the Senior MTN through the issuance of Sub-MTN, failing which, through the sale of the Property by the Security Trustee.


Analytical contacts
Wong Ee Loo
(603) 3385 2521

Lim Chern Yit
(603) 3385 2528


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.

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