MARC has affirmed its rating of AAA on Inverfin Sdn Bhd’s outstanding RM160 million Tranche A notes under its RM200 million Medium-Term Notes (MTN) programme. The rating outlook has been revised to stable from negative.
The outlook revision reflects the significant improvement in occupancy level of the collateral property, Menara Citibank, which has eased pressure on rental income. At end-2019, the occupancy level at the Grade A office building rose to 86.0% from 73.2% in the previous year. The improvement came about after Citigroup Transaction Services (M) Sdn Bhd (CTSM) tenanted about 18.8% of the net lettable area (NLA) of 733,038 sq ft of Menara Citibank. The tenancy commenced in 4Q2019. As a result, the net operating income (NOI) is forecast to increase 12.1% y-o-y to RM32.4 million in 2020. MARC also understands that Inverfin is waiving the rental for the retail and food court tenants during the period of the movement control order. As these tenants account for about 2% of rental income, the impact on the overall NOI is minimal.
The rating affirmation reflects the Tranche A notes’ loan-to-value (LTV) ratio of 41.9% that remains within the LTV benchmarks that MARC applies for the AAA rating band. The rating agency has valued Menara Citibank at RM381.9 million. The maximum limit of the Tranche A notes is RM160 million.
Citibank Berhad and its related company CTSM occupy a combined 52.1% of the NLA; the average rental rate was RM6.00 psf in 2019. MARC views that the high tenant concentration risk is mitigated by Citibank’s longstanding tenancy track record and part ownership of the building. As at December 31, 2019, the security coverage ratio and finance service coverage ratio remained strong at 4.34x and 5.54x.
Lim Wooi Loon, +603-2717 2943/ email@example.com