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15 Jan | Friday
Menara ABS Berhad fully redeems Tranche B3 Sukuk; RAM closely monitoring Tranche A
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 As such, its AAA/stable rating has been withdrawn.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/
Outlook
Outstanding Amount
(RM mil)
Expected
Maturity
Legal
Maturity
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
williamtan@ram.com.my
 
Media contact
Padthma Subbiah
(603) 3385 2577
padthma@ram.com.my
 
Date of release: 15 January 2021
 
 
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
 
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
 
Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
 
Published by RAM Rating Services Berhad
Copyright 2021 by RAM Rating Services Berhad
source: RAM Rating Services
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