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null Menara ABS Berhad fully redeems Tranche B3 Sukuk; RAM closely monitoring Tranche A

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Menara ABS Berhad fully redeems Tranche B3 Sukuk; RAM closely monitoring Tranche A

15 Jan 2021 | Friday source: RAM Rating Services

RAM Ratings has received confirmation from the Trustee that the RM85 mil Tranche B3 Sukuk under Menara ABS Berhad’s (the Issuer) RM1 bil Sukuk Ijarah Programme (2008/2023) has been fully redeemed as scheduled on 15 January 2021. As such, its AAA/stable rating has been withdrawn. 
Sukuk Ijarah Rating/
Outstanding Amount
(RM mil)
Tranche A
Tranche A1 AAA/Stable 240 15 January 2021 13 January 2023
Tranche A2 AA2/Stable 55
Tranche A3 AA3/Stable 40
Tranche A4 AA3/Stable 10
Tranche B
Tranche B1 AAA/Stable Redeemed  
Tranche B2 Redeemed
Tranche B3 Redeemed 15 January 2021
Tranche C Unrated 500 15 January 2021 13 January 2023
The RM345 mil Tranches A1 to A4 Sukuk (collectively, the Tranche A Sukuk) remain outstanding as at 15 January 2021. The issuer has 2 years before the legal maturity date of 15 January 2023 to ensure redemption of the Tranche A Sukuk. 
The issuer is in discussion with the sponsor, Telekom Malaysia Berhad (TM), for TM to buy back or lease selected properties in the portfolio for a refinancing exercise. However, the Covid-19 pandemic and lacklustre office market conditions have posed challenges in negotiating lease renewal and/or the disposal of the properties in open market. 
At this point, the Tranche C Sukukholders have not confirmed whether to extend the special funding option to the Issuer to facilitate redemption of the Tranche A Sukuk. That said, there is minimal risk of cashflow disruption or reduced liquidity to meet the periodic distributions to the Tranche A Sukuk during the two-year tail period. Contracted payments under the master lease, which expires on 15 January 2023, continue to be fulfilled. 
The outcome of lease negotiations may, however, have a bearing on the sustainable valuation of the underlying properties and may lead to downward rating pressures. Continued deferral in arriving at a clear resolution of asset disposal or lease renewals over the next 8-12 months may increase redemption risk thereby leading to a multi-notch downward revision of the ratings, notwithstanding the available credit support provided by the underlying properties.
Menara ABS is a trust-owned special-purpose entity sponsored by TM to facilitate the securitisation of four of its properties – Menara TM, Menara Celcom, TM Taman Desa and TM Cyberjaya – via a Sukuk Ijarah Agreement. 
Analytical contact
William Tan
(603) 3385 2530
Media contact
Padthma Subbiah
(603) 3385 2577
Date of release: 15 January 2021
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