YNH Property sukuk downgraded after RM6.8m reserve shortfall; land sales key to redemption
MARC Ratings has downgraded YNH Property Bhd's RM700 million Sukuk Wakalah programme to B (IS) and placed it on MARC Watch Negative after a RM6.8 million reserve-account shortfall triggered a technical default. The developer's ability to meet a RM170 million sukuk maturity in February 2027 depends o
PETALING JAYA (Nov 7): A RM6.8 million sukuk reserve-account shortfall has triggered a technical default and a downgrade by MARC Ratings, highlighting YNH Property Bhd’s reliance on two pending land sales to meet separate funding obligations.
In a statement on Friday (Nov 6), MARC lowered the rating on the developer’s RM700 million Sukuk Wakalah programme to B (IS) from BB (IS) and placed it on MARC Watch Negative. The agency cited weakened liquidity, limited internally-generated cash flow and heightened repayment risks ahead of a RM170 million sukuk maturity on Feb 26, 2027.
As at Oct 27, the reserve account held RM54.4 million against the required RM61.2 million. MARC said YNH must rectify the shortfall within a 30-day remedy period to avert an event of default, and that the company had indicated its intention to do so. The reserve requirement calls for YNH to progressively accumulate 50 per cent of the RM170 million maturity ahead of its repayment date.
Beyond replenishing the account, the developer’s redemption plan depends substantially on completing the RM170 million sale of its Desa Sri Hartamas land to Sunway Living Space Sdn Bhd. MARC expects the transaction to become unconditional by end-November, with completion targeted for January 2027. After settling approximately RM65 million in outstanding borrowings tied to the land, about RM105 million is expected to be available for sukuk redemption. The agency warned that the proximity of the expected completion to the February maturity leaves YNH little room to absorb further delays.
The proposed disposal involves approximately 5.098 acres of freehold vacant land in Desa Sri Hartamas, Kuala Lumpur, held under H.S.(D) 47941, PT 48632. The sale and purchase agreement was signed on May 12, 2023. In a Sept 11 Bursa Malaysia filing, YNH said its wholly-owned subsidiary Kar Sin Bhd had signed a sixth supplemental agreement a day earlier, extending the conditional period from Sept 12 to Dec 31, 2026. Kar Sin must use its best endeavours to fulfil the outstanding conditions precedent by that deadline. If they remain unmet, Sunway Living Space may exercise its contractual rights and remedies, including terminating the agreement. Any further extension requires the parties’ written agreement. YNH did not identify the remaining conditions in that announcement.
A second proposed disposal, involving freehold commercial development land along Jalan Sultan Ismail in Kuala Lumpur, is intended to address YNH’s perpetual securities and outstanding coupon obligations. Under its July 8 Bursa Malaysia filing, YNH Land Sdn Bhd agreed to sell the property to Chin Hin Property (JSI) Sdn Bhd for RM455 million. The consideration comprises RM409.475 million in cash, RM45.5 million in redeemable preference shares and RM25,000 in ordinary shares in the purchaser. MARC expects completion by January 2027, with the cash proceeds intended to redeem YNH’s RM350 million outstanding unrated perpetual bond and settle outstanding coupons.
In July, YNH exercised its contractual right to defer approximately RM34.41 million in coupon payments and accumulated coupon obligations on its two outstanding perpetual securities tranches while awaiting completion of the land sale. The payments were deferred to Jan 29 and Feb 8, 2027, according to notices published on Bank Negara Malaysia’s FAST platform. YNH said the deferment complied with the trust deed and would preserve cash for its ongoing developments.
The downgrade also follows YNH’s Oct 30 announcement that it had received an unmodified audit opinion for the financial year ended June 30, 2026, after qualified opinions in the preceding three reporting periods. In the same update, the company said total borrowings had fallen 23.3 per cent to RM409.8 million as at June 30, from RM534.1 million a year earlier. However, MARC said operating performance offered limited support to liquidity. FY2026 revenue declined to RM106.9 million amid limited progress billings, while the group’s few active developments principally comprised Solasta Dutamas in Kuala Lumpur and a shoplot development in Manjung, Perak. The limited pipeline constrains near-term earnings and operating cash generation, leaving the developer’s immediate funding position heavily dependent on completing the disposals on schedule, the agency said.
