MARC Ratings 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 880,680 sq ft.
The affirmed ratings reflect the MTN classes’ loan-to-value (LTV) ratios which remain within the respective benchmarks MARC Ratings 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 42.1%, 50.5% and 185.0%. Under this approach, the mall is valued at RM594.4 million, representing a 37.3% discount from the market value as at end-December 2021 as ascertained by a valuer.
For 2021, Special Coral’s financial performance reflected the impact of pandemic-induced closures, with revenue declining by 5.5% y-o-y to RM84.8 million. It also recorded a 9.2% y-o-y decline in net operating income (NOI) to RM50.2 million. Debt service cover ratio remains healthy at 4.73x and 3.83x for Class A and Class B MTN.
The lower NOI was largely due to the provision of rental rebates to tenants as well as the lower average rental rate for Queensbay Mall as demand for retail space remained subdued. The mall’s strategic location in Bayan Lepas, Penang and its diversified tenant profile have largely moderated the impact of the pandemic.