MARC downgrades YNH’s programme rating to BBBIS amid liquidity concerns and asset sale delays

• This downgrade reflects growing concerns over YNH's weak liquidity position and further delays in the sale of assets, which is much-needed for cash infusion.

KUALA LUMPUR (Jan 18): MARC Ratings has downgraded its rating on YNH Property Bhd's Islamic Medium-Term Notes Programme (Sukuk Wakalah) to BBBIS from AIS and concurrently placed the rating on MARCWatch Negative.

This downgrade reflects growing concerns over YNH's weak liquidity position and further delays in the sale of assets, which is much-needed for cash infusion.

As of Sept 30, 2023, the group's liquidity position as reflected by cash and short-term deposits stood at about RM17 million, MARC said in a statement on Thursday.

Meanwhile, the adjusted borrowings, including the outstanding under the rated sukuk wakalah of RM323 million and the perpetual sukuk of RM345.9 million, amounted to about RM1.3 billion, it added.

Besides, the first tranche of RM153 million under the sukuk wakalah will mature on Feb 28, 2025, for which YNH has to build up 4%, or RM6.1 million per month, from February 2024 onwards, according to the agency.

Due to concerns over its liquidity position, the rating agency opines that the group’s further plans to launch other property projects would be impeded.

The rating agency also stated that the group has only a few projects, of which the ongoing Solasta Dutamas — a high-rise residential development in Mont'Kiara with a gross development value (GDV) of RM770 million — accounts for the bulk of its total GDV and contributes a modest cash flow.

The rating agency attributes the delayed progress on asset monetization and the weakening business profile to material issues faced by YNH management and key shareholders.

“Among these issues were the need to appoint new external auditors and an audit committee chairman, as both did not seek reappointment in December 2023, and appointing an independent party to review past transactions related to some joint venture and turnkey agreements, aimed at enhancing governance,” it added.

The MARCWatch Negative placement would be uplifted if YNH makes meaningful progress; however, should performance continue to worsen, the rating would be subjected to further downgrades, it said.

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