MARC has affirmed its ratings of AAA, AA and B- on special purpose vehicle Special Coral Sdn Bhd’s RM250.0 million Senior Class A Medium-Term Notes (MTN), RM50.0 million Senior Class B MTN and RM800.0 million Subordinated Class MTN under the existing RM1.1 billion MTN programme. The ratings outlook is stable. Special Coral owns about 91.6% of the strata area in Queensbay Mall, an eight-storey shopping complex in Penang with a net lettable area (NLA) of 881,458 sq ft.

The affirmed ratings reflect the MTN classes’ loan-to-value (LTV) ratios which remain within the respective benchmarks MARC applies for the rating bands. Based on the valuation of Queensbay Mall using MARC’s income capitalisation approach, the Class A MTN, Class B MTN and Subordinated Class MTN have LTV ratios of 40.9%, 49.1% and 180.0%. Under this approach, the mall is valued at RM611.1 million, representing a 35.6% discount from the market value as at end-December 2020 as ascertained by a valuer.

For 2020, Special Coral’s financial performance was characterised by lower revenue and reduced cash flow owing to the impact from the pandemic. It recorded a 30.1% y-o-y decline in net operating income (NOI) to RM55.3 million. Debt service cover ratio remains healthy at 5.20x and 4.21x for Class A and Class B MTN.

The lower NOI arose largely from the closure of its retail operations between March and May 2020, low shopper traffic volume in the subsequent months as well as the rental rebates offered to tenants. The mall’s strategic location in Bayan Lepas, Penang and a diversified tenant profile have largely moderated the impact from the pandemic as reflected by the marginal y-o-y decline in occupancy level and average rental rate to 97.0% and RM8.75 psf (2019: 99.7%; RM8.96 psf) at end-2020.

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