[MARC] MARC Ratings assigns preliminary A+IS rating to Yinson’s proposed sukuk programme

MARC Ratings has assigned a preliminary rating of A+IS to Yinson Holdings Berhad’s (YHB) proposed RM2.0 billion Islamic Medium-Term Notes (IMTN) (Sukuk Wakalah II) as well as affirmed its ratings of A+IS on the RM1.0 billion IMTN Programme (Sukuk Wakalah I) and A-IS on the RM1.0 billion Subordinated Perpetual Islamic Notes Programme (perpetual sukuk). The two-notch rating differential between the senior and perpetual sukuk reflects MARC Ratings’ notching approach to subordinated debt and hybrid securities. All ratings carry a stable outlook.

With respect to the new Sukuk Wakalah II, YHB intends to drawdown an initial amount of RM1.0 billion to refinance the outstanding note under the existing RM1.0 billion Sukuk Wakalah I maturing in December 2026. Currently, there are no plans to drawdown the remaining RM1.0 billion under the new facility.

The senior rating reflects YHB group’s substantial long-term floating production storage and offloading (FPSO) charters, solid operational execution, and proven track record, underpinned by high technical uptime and earnings visibility, though moderated by the capital-intensive FPSO business and sizeable construction-related debt.

FPSO Maria Quitéria, FPSO Atlanta, and Agogo FPSO commenced operations in October 2024, December 2024, and August 2025, respectively, expanding the group’s fleet to nine operational FPSOs/FSOs and two FSOs under construction. The group’s technical strength is evident in the on-time or ahead-of-schedule delivery of projects and an average fleet uptime of 99.6% in financial year ended January 2021 (FY2021) to 1HFY2026, supported by over 20 years of offshore oil and gas experience. FY2026 revenue is expected to remain stable, as contributions from FPSO Maria Quitéria, FPSO Atlanta, and Agogo FPSO offset the deconsolidation of FPSO Anna Nery. Full-year contributions from all three FPSOs are expected to improve YHB’s financial standing and drive stronger growth in FY2027. Upon commissioning, YHB/Yinson Production’s financial guarantees will be lifted, reducing YHB’s leverage, with the recourse debt-to-equity ratio projected to fall to 1.62x and 0.99x in FY2026 and FY2027, from 2.25x in FY2025.

To strengthen its balance sheet, wholly-owned subsidiary Yinson Production Offshore Holding Limited (YPOHL) is issuing USD1.0 billion of redeemable convertible preference shares (RCPS) in tranches to partially fund new FPSO projects under bidding. The first tranche of USD300 million was issued on 17 June 2025, with the remaining tranches to be issued within 18 months up to December 2026. With 50% equity credit assigned to the RCPS, recourse leverage is projected to fall below 1.5x from FY2027 (1HFY2026: 1.68x), despite total borrowings rising to RM21.9 billion and RM24.4 billion in FY2026 and FY2027 (FY2025: RM17.6 billion), mainly to fund final payments for Agogo FPSO and new FPSO projects. Compared to the most recent review in August 2025, the latest projections reflect a higher recourse DE of 1.62x (August 2025: 1.46x) in FY2026, due to lower projected shareholders’ funds following US dollar weakness and share buybacks during the review period.

Holding company YHB utilises dividend received from YPOHL to meet its financial and operational needs. During FY2026, YPOHL upstreamed USD200 million in June 2025 and will cap annual payouts at USD125 million, subject to cash dividends to RCPS holders per the agreed ratio until the RCPS is converted or redeemed.

Base case projections indicate that YHB can meet its obligations using expected dividends from YPOHL. Under stress scenarios, the group has flexibility to reduce discretionary spending, such as non-essential capex and share buybacks. Over the medium term, a planned Initial Public Offering (IPO) (targeted in three to five years) would convert the RCPS into equity, thereby removing dividend caps. Should the IPO be delayed, alternative options include refinancing, conversion to a perpetual instrument, or partial asset sales.

As of end-July 2025, the FPSO order book remained strong at USD19.8 billion, with potential upside from prospective project wins. In 1HFY2026, recurring revenue declined 4.1% y-o-y to RM1,397 million, as expected, following the reclassification of FPSO Anna Nery as a joint venture, and partly offset by new contributions from FPSO Maria Quitéria and FPSO Atlanta. Pre-tax profit fell 49% y-o-y due to lower construction profit recognition after project completions. Liquidity stayed healthy, with a cash balance of RM4.3 billion as of end-July 2025.

Amirul Rahul, +603-2717 2905/ rahul@marc.com.my
Sharidan Salleh, +603-2717 2954/ sharidan@marc.com.my