Published on 09 Nov 2023.
RAM Ratings has assigned a preliminary AA3/Stable rating to the proposed RM390 mil issuance (Tranche 5 IMTN) under Exsim Capital Resources Berhad’s (Exsim Capital or the Issuer) RM2 bil Sukuk Musharakah Programme (IMTN Programme). This will be the first ASEAN Green SRI Sukuk in the region to be backed by future receipts under sales and purchase agreements (SPAs) of green-certified residential property projects.
The Tranche 5 IMTN will be backed by future receipts under SPAs for D’Clover Residences and D’Terra Residences (collectively, the Projects). Awarded provisional Gold GreenRE certifications, the Projects are located in Damansara Perdana, Selangor. The future receipts will fund remaining construction costs of the Projects and meet the Issuer’s fees, expenses and obligations in respect of the Tranche 5 IMTN and the accompanying Sukuk Murabahah ICP (Tranche 5 ICP). The proposed RM85 mil unrated Tranche 5 ICP will act as a liquidity line to cover cost overruns, working capital gaps and any shortfalls in the payment of the Tranche 5 IMTN profit and senior expenses. The Tranche 5 ICP will be fully underwritten by a financial institution rated AAA/Stable/P1 by RAM, and will not be guaranteed.
Under our cashflow analysis, we assumed 99% take-up rate for the Projects and a sizeable proportion of the buyers will be end-financed by financial institutions. Our AA3 stress scenario factors in buyer defaults, property price declines during recoveries and a 2.5% construction cost overrun, among others. Assuming drawdown in December 2023, the projected cash flow would adequately meet timely and full payment of all obligations under the Tranche 5 IMTN by the legal maturity date. The respective time gaps between the targeted vacant possession (VP) dates and the legal VP date (16 February 2027) of the Projects provide ample buffers against any unexpected construction delays and/or time extensions granted to the contractor.
The Projects under Tranche 5 IMTN are constructed on a master land title together with two other development projects which will remain charged to the existing financier given the existing bridging facility for one of the other projects. A specific debenture incorporating fixed and floating charges over all current and future assets relating to the Projects, including the portion of land constructed on, will be created by the Developer to secure Tranche 5 IMTN would include the relevant portion of the land. A letter of disclaimer from the existing financier will be obtained to disclaim all its rights, interest and claims over the portion of land where the Projects are constructed, in lieu of a land charge. Notwithstanding that, the legal counsel is of the view that the overall integrity of the intended transaction structure would remain intact with the security arrangement even if the existing financier enforced on its land charge for the portion of land not disclaimed. Upon such event, it will be a trigger event for the transaction and the Security Trustee will be entitled to exercise step-in rights to appoint a PMC and manage ongoing works of the Projects.
The final rating assignment will be subject to RAM’s satisfactory review of the final transaction documents and relevant legal and tax. Material changes may result in a change in the rating. These include the take-up rate, buyers’ profile, construction progress, terms of the underwriting facilities, and principal terms and conditions of the transaction.
Exsim Capital is a special-purpose vehicle wholly owned by Exsim Development Sdn Bhd. In line with the sponsor’s positioning to develop green residential projects, the Issuer has revised the IMTN Programme to incorporate the flexibility to issue Sustainability Sukuk Musharakah, which will entail additional requirements for issuance. RAM Sustainability Sdn Bhd has issued its Second Opinion Report on Exsim Capital’s ASEAN Sustainability SRI Sukuk framework (click here).
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Ratings on Exsim Capital Resources Berhad