KUALA LUMPUR, May 6 — RAM Rating Services Bhd (RAM Ratings) has reaffirmed the respective AAA/Stable and AA2/Stable ratings of the RM295 million Class A and RM60 million Class B Issue 2 sukuk ijarah issued by a special-purpose vehicle of Al-’Aqar Healthcare Real Estate Investment Trust (REIT).
The sukuk, part of an Islamic medium-term notes programme of up to RM1 billion, was issued by Al-’Aqar Capital Sdn Bhd, which was set up to raise funds by issuing Islamic securities via commercial real estate-backed transactions.
In a statement today, RAM Ratings said the reaffirmation was premised on the expectations that the underlying hospitals secured under Issue 2 (the properties), would continue to maintain stable performances, supported by the long-term lease arrangement with the hospital operator KPJ Healthcare Bhd.
“The 19 hospitals’ total rental income of RM85.5 million for the financial year ended Dec 31, 2018, was in line with our annual sustainable cashflow assumption of RM85.0 million.
“Accordingly, the available credit support for the respective AAA and AA2 ratings remained adequate, as reflected in the loan-to-value ratios of 38.2 per cent and 45.9 per cent and stressed finance service coverage ratios of 2.37 times and 2.25 times,” it said.
As at end-December 2018, the rating agency said the properties’ combined market value appreciated by a marginal 2.36 per cent year-on-year to RM1.23 billion with most properties in established urban areas such as Kuala Lumpur, Selangor and Johor.
RAM Ratings noted that while all leases between the REIT and the KPJ group were long-term for a 15-year period, the leases of nearly half of the properties by market value will expire a month after Issue 2’s expected maturity date.
It said this exposure would increase to 63.5 per cent before the legal maturity date.
“As the market value of the properties is mainly driven by the existing leases, asset value may significantly deviate if the leases are not subsequently renewed or lease rates renegotiated.
“However, non-renewal is seen as remote, given that the assets are part of the KPJ group’s core business operations. The commitment of the hospital operators is reinforced by their undertaking to renew their long-term leases upon expiry,” it added. — Bernama
