Published on 28 Jul 2023.
This media release provides an update on the construction progress of three projects backing the RM323 mil second issuance (Tranche 2 IMTN) and RM300 mil third issuance (Tranche 3 IMTN) under Exsim Capital Resources Berhad’s (Exsim Capital or the Issuer) RM2 bil Sukuk Musharakah Programme. Exsim Capital is a wholly owned subsidiary and special-purpose vehicle of Exsim Development Sdn Bhd.
Subsequent to our previous rating reviews on Tranches 2 and 3 in September and December 2022, the developers had granted the contractor another extension of time (EOT) to complete the projects in view of challenges in the construction sector during the Covid-19 pandemic. Going forward, workforce and building material supply for the projects are expected to be manageable and should not have any material impact on construction progress.
The developers and independent project certifier are of the view that all the projects are on track to meet the revised target Certificate of Completion and Compliance (CCC)/vacant possession (VP) dates (Table 1). Based on the latest construction progress and the contractor’s revised work schedule, we believe the developers will be able to meet the original legal CCC/VP dates of the respective projects backing the Tranche 2 and Tranche 3 transactions. In this regard, the Issuer is envisaged to be able to meet full repayment of the sukuk on the expected maturity dates.
Table 1: Projects’ progress and milestones following latest EOT granted to contractor
# Original dates prior to EOT granted by Ministry of Housing and Local Government to developer
^ As at 3 July 2023
* As at 27 June 2023
** Developer’s target
CPC = Certificate of Practical Completion
Since financial close, buyer defaults due to the failure to meet obligations under Sales and purchase agreements (SPAs) for Tranches 2 and 3 accounted for a respective 0.6% and 0.7% of the initial gross development value (GDV) – well below RAM’s applied default frequency of 7.2%. For Tranche 2 IMTN, SPA terminations amounted to 11.7% of initial GDV owing to job losses or pandemic-induced difficulties. The developer allowed these on a goodwill basis without any deposit forfeiture. Units for which buyers defaulted or SPAs were terminated nevertheless were resold within one to three months, with minimal price differences. As at end-May 2023, the three projects had achieved near full take-up, with only five unsold units combined.
To date, total progress billings and payments to the contractor have been slower than our initial expectations owing to prolonged construction progress. Working capital gaps were adequately supported by the respective ICP facilities under each tranche. Going forward, we expect minimal drawdown of the ICP facilities as all projects have progressed to the main building works phase where monthly project net cash flow is anticipated to be positive. No cost overruns have been noted so far, given the fixed-price lump-sum contracts.
Please refer to our transaction update report, published on 28 July 2023, for further details.
(603) 3385 2517
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.
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 2023 by RAM Rating Services Berhad
Rating Rationale: Exsim Capital Resources Berhad Tranche 2
Rating Rationale: Exsim Capital Resources Berhad Tranche 3
Ratings on Exsim Capital Resources Berhad