Posted Date: February 15, 2022
MARC Ratings has revised the ratings outlook to negative from stable on its A+IS and AIS ratings on Tropicana Corporation Berhad’s RM1.5 billion Islamic Medium-Term Notes Programme (Sukuk Wakalah) and RM2.0 billion Perpetual Sukuk Programme (Perpetual Sukuk).
The outlook revision highlights the rating agency’s increasing concern over the rise in group borrowing level which stood at RM4.5 billion (including the outstanding Perpetual Sukuk) as at end-September 2021, from RM2.8 billion when the initial rating was assigned in April 2020. The group had indicated at the time that any increase in borrowings would be mitigated by proceeds from asset disposals. MARC Ratings notes that the planned disposals have not materialised as at date, although we understand that the group is making efforts to finalise some disposals by mid-2022. As a result of the increase in borrowings, the group’s coverage metrics have weakened. The rating agency remains mindful that the outlook for the domestic property industry remains challenging; developments that have long gestation periods are also exposed to project risks.
MARC Ratings will undertake a full rating review upon the release of the group’s 2021 audited financial accounts. The ratings could be lowered if there is no material development to mitigate the impact of the increase in group borrowings on its balance sheet. Conversely, among other factors, a clear improvement in the group’s financial metrics could lead to the ratings outlook to be revised back to stable.