MARC Ratings has affirmed its ratings on Trusmadi Capital Sdn Bhd’s Issue 1 RM235 million Class A, RM40 million Class B and RM25 million Class C Medium-Term Notes (MTN) at AAA, AA, and A. The rating agency has also affirmed its MARC-1 rating on Trusmadi Capital’s Issue 1 RM300 million Commercial Papers (CP). The MTN and CP are subject to a combined issuance limit of RM300 million. The ratings outlook is stable. As at end-March 2025, the outstanding amounts stood at RM20 million Class A MTN and RM240 million CP.
The rating affirmations on the MTN classes and the CP reflect our expectations that their loan-to-value (LTV) ratios will remain consistent with the LTV benchmarks at the respective rating levels. MARC Ratings also considers Menara Shell’s (the collateral) prime location and strong performance alongside its quality tenants.
The LTV ratios are derived based on MARC Ratings’ income capitalisation approach using a stabilised net operating income (NOI) of RM44.0 million. Under this approach, the value of Menara Shell stood at RM586.7 million, which is 12.8% lower than its market value of RM672.5 million as verified by an independent valuer as of 31 December 2024.
Menara Shell has a total net lettable area (NLA) of 557,458 sq ft. Occupancy rate of the building dropped to 82% as at end-2024 from 99% as at end-2023, mainly due to the departure of a key tenant that had occupied 17.6% of total NLA to its new corporate headquarters. The anchor tenant, Shell Malaysia Trading Sdn Bhd (Shell), a wholly-owned subsidiary of Shell Plc, occupies a substantial 54.7% of total NLA through end-2028, which poses concentration risk. Nevertheless, the rating agency views this risk as alleviated by the long-term tenancy agreement with Shell. In case of early termination, there are also provisions for rental claims over the remaining unexpired term of the leases.
In 2024, NOI declined to RM42.5 million due to the departure of a key tenant at the end of its tenancy on 31 May 2024. As a result, the average rental rate of total NLA for 2024 fell to RM6.96 psf (2023: RM8.30 psf). Moving forward, we understand that tenants with leases expiring in 2025 have already commenced negotiations to extend their tenancies for at least three years at similar or higher rental rates. MARC Ratings also understands that Sentral Reit Management, that manages Menara Shell, is in negotiations with new potential tenants that would occupy 6.2% of total NLA.
Given the current outstanding issuance amount of RM260 million is within the issuance limit of RM300 million, the LTV ratios will only be breached if the average NOI declines below RM30 million. For this to occur, the minimum occupancy rate for the LTV ratios would be about 76%, or the minimum rental rate would be about RM6.50 psf. This provides a buffer, assuming no additional issuances are made under the programme. In terms of the CP’s exposure to potential rollover risk, it is mitigated by the availability of a commitment from the investor to subscribe to the CP throughout its expected tenure. Meanwhile, the refinancing risk of the MTNs is buffered by the two-year tail between the expected and legal maturities.