[RAM] RAM Ratings assigns preliminary AA3/Stable rating to Exsim Capital's Tranche 6 ASEAN Green SRI Sukuk

RAM Ratings has assigned a preliminary rating of AA₃/Stable to the proposed RM310 mil issuance (Tranche 6 IMTN) under Exsim Capital Resources Berhad’s (Exsim Capital or the Issuer) RM2 bil Sukuk Musharakah Programme (IMTN Programme). The Issuer is a special-purpose financing vehicle wholly owned by Exsim Development Sdn Bhd (Exsim).

Tranche 6 IMTN will be backed by future receivables under sale and purchase agreements (SPA) for Hugoz Suites and Kyliez Suites (the Projects). Located off Jalan Tun Razak and Jalan Ampang, Kuala Lumpur City Centre, the Projects are set to receive Gold GreenRE certification, qualifying them as eligible green assets under Exsim’s ASEAN Sustainability SRI Sukuk Framework.

The future receipts will fund the Projects’ remaining construction costs and the Issuer’s fees, expenses and obligations related to the Tranche 6 IMTN and the accompanying Sukuk Murabahah ICP (Tranche 6 ICP). The proposed RM76 mil unrated Tranche 6 ICP will serve as a liquidity line for cost overruns, working capital gaps and any shortfalls in IMTN profit payments and senior expenses. The Tranche 6 ICP will be fully underwritten by a financial institution rated AAA/Stable/P1 by RAM.

In our cash flow sensitivity, we project a 2.0% to 3.5% construction cost overrun and a three to four-month delay in receipt of progress payments for Hugoz and Kyliez; the former has progressed beyond the riskier piling and sub-structure stage. Our stress scenarios assume 99% take-up rate for the Projects (a condition for issuance), buyer defaults and potential declines in property prices post-default. The adjusted default frequency we have applied is higher than that in previously rated transactions under Exsim Capital as purchases for Hugoz and Kyliez units are viewed as investments, given the design and offering. However, buyer default risk is largely moderated by the substantial proportion of bank end-financed units. 

Overall, we expect a net development profit of RM416.1 mil for the tenure of the Tranche 6 IMTN. This translates into an advance rate of 74.5% for the Tranche 6 issuance, providing adequate cashflow buffers under stress scenarios that commensurate with an AA3 rating. 

The fixed-price lump-sum contract for the Projects mitigates significant cost overrun risk. Exsim has provided a Completion Undertaking to complete the Projects by the stipulated legal Certificate of Completion and Compliance (CCC) date. Assuming issuance in November 2024, we believe the 15-month gap for Hugoz and the 16-month gap for Kyliez between legal Certificate of Practical Completion dates and legal CCC dates provides ample buffer against construction delays. Should a trigger event occur, the Security Trustee may step in with assistance from the independent project certifier to manage the Projects.

The assignment of the final rating will be subject to RAM’s satisfactory review of the final transaction documents and relevant legal and tax considerations. Material changes, including the take-up rate, buyer profiles, construction progress, underwriting terms and principal transaction conditions, may result in a change in the rating. 


Analytical contacts
L Nurisya Abdullah
(603) 3385 2492
nurisya@ram.com.my

Lim Chern Yit
(603) 3385 2528
chernyit@ram.com.my

Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my