[RAM] RAM Ratings affirms Exsim Capital's Tranche 3, 4 and 5 IMTN ratings

RAM Ratings has affirmed the respective AA3/Stable ratings of Exsim Capital Resources Berhad’s (Exsim Capital or the Issuer) Tranche 3, 4 and 5 Islamic Medium-Term Notes (IMTN), issued under its RM2 bil Sukuk Musharakah Programme. 

The rating affirmations are premised on the available time buffer, the transactions’ adequate liquidity and construction progress of the underlying projects. During the review period, the contractors for D’Erica Residences (backing Tranche 3) and The Fiddlewoodz (backing Tranche 4) were given an extension of time (EOT) of 150 days and 52 days, respectively. Rock blasting activity had delayed work at D’Erica while Fiddlewoodz contractors faced logistical challenges and limited onsite storage space. 

As these issues, among others, are expected to continue to affect the projects, further EOTs of 90-100 days are likely to be required at a later date. Although the EOTs will push back the Certificate of Practical Completion (CPC) and delivery of the Certificate of Completion and Compliance (CCC)/Vacant Possession (VP) to buyers, comfort is drawn from the available time buffer of five (D’Erica) to nine (Fiddlewoodz) months between the targeted CCC/VP and the respective expected sukuk maturity dates.

Meanwhile, construction progress at D’Clover Residences – which together with D’Terra Residences backs the Tranche 5 IMTN – was largely on track until a solid rock was discovered at the basement level in December 2023, requiring the contactor to reallocate manpower for hacking and removal. Work at D’Terra has been hampered by logistics issues as road access is periodically blocked for master road works. As a result, contractors for D’Clover and D’Terra are expected to get EOTs of seven and five months, respectively. While the expected EOTs would reduce the time buffers, they would remain comfortable at 11 and 12 months between the target CCC/VP and legal CCC/VP for D’Clover and D’Terra.



The liquidity positions of Tranches 3, 4 and 5 remain supported by healthy buyer profiles and the respective unrated Islamic Commercial Papers (ICP) facilities established concurrently with issued IMTNs. Since issuance, the default rates of all projects (D’Erica: 1.0%; The Fiddlewoodz: 1.1%; D’Clover and D’Terra: 0.5%) have been well below the default frequency applied by RAM. Defaulted units were resold between one and four months at minimal price differences. As at end-March 2024, The Fiddlewoodz and D’Clover were fully taken up while D’Erica and D’Terra had a respective two and five unsold units. Going forward, we expect minimal drawdown of the ICP facilities as Tranches 3 and 5 are generating positive monthly project net cash flows while Tranche 4 is expected to record positive monthly net cash flows in the coming months. No construction cost overruns have been noted so far, given the fixed-price lump-sum contracts.