KUALA LUMPUR: MARC Ratings has downgraded YNH Property Bhd’s RM700 million Sukuk Wakalah programme rating to BIS from BBIS and placed it on MARCWatch Negative, citing weakened liquidity and heightened refinancing and repayment risks.
The rating agency said the downgrade reflects YNH’s weak internal cash flow generation, continued reliance on asset disposals to meet financial obligations and limited earnings visibility.
“These pressures are compounded by a shortfall in the sukuk reserve account, which has resulted in a technical default,” it said.
As at Oct 27, YNH’s reserve account stood at RM54.4 million, RM6.8 million below the required RM61.2 million, resulting in a technical default, the rating agency said.
The company is required to rectify the shortfall within a 30-day remedy period to prevent an event of default.
“While YNH has indicated its intention to remedy the shortfall within the permitted period, the occurrence of the reserve-account shortfall nonetheless underscores the company’s constrained liquidity and limited capacity to meet its funding requirements through internally generated cash flows,” added MARC.
The rating agency said the MARCWatch Negative placement reflects significant uncertainty over YNH’s ability to meet its RM170 million sukuk maturity on Feb 26, 2027.
It said repayment would largely depend on the timely completion of planned asset disposals, with any further delays potentially increasing repayment risks.
YNH’s sukuk repayment is substantially dependent on the proposed RM170 million disposal of its Desa Sri Hartamas land to Sunway Living Space Sdn Bhd.
The transaction, first announced in May 2023 and extended several times, is expected to become unconditional by the end of November 2026, with completion targeted for January 2027.
MARC Ratings said the disposal is expected to generate RM105 million in net proceeds after settling approximately RM65 million in outstanding loans tied to the land.
“Given the proximity of the expected disposal completion to the February 2027 sukuk maturity, however, YNH has limited headroom to absorb any further delays in the transaction,” it added.
YNH is also disposing of a 1.05 hectares freehold land parcel along Jalan Sultan Ismail in Kuala Lumpur to Chin Hin Property (JSI) Sdn Bhd for RM455 million.
The transaction, expected to be completed by January 2027, comprises RM409.5 million in cash and RM45.5 million in redeemable preference shares in a 70 per cent-owned subsidiary of Chin Hin Group Property Bhd.
The cash proceeds are intended to fully redeem YNH’s RM350 million outstanding unrated perpetual bond and settle outstanding coupon obligations.
MARC Ratings said while both disposals could ease liquidity pressures and reduce borrowings, YNH’s immediate financial position remains heavily dependent on their timely completion.
Meanwhile, the rating agency said YNH’s weak operating performance provided limited support to its liquidity position.
The company’s revenue declined to RM106.9 million in the financial year ended 2026, reflecting limited progress billings from ongoing projects.
YNH currently has few active developments, mainly Solasta Dutamas in Kuala Lumpur and a shop lot development in Manjung, Perak.
“The limited development pipeline constrains near-term earnings and operating cash flow generation, reducing YNH’s capacity to rebuild liquidity organically,” it said.