KUALA LUMPUR (April 8): YNH Property Bhd is deemed to be in a “technical default” for its Islamic medium-term notes programme (sukuk wakalah), according to the MARC Ratings, which downgraded its rating further to BBB-, from the BBB+ when it was first placed on negative watch in January this year.

“The rating action reflects MARC Ratings’ heightened concerns on YNH’s continued weak financial position, the lack of meaningful earnings visibility, and the protracted delays in asset disposals,” it said in a statement on Monday.

YNH has an outstanding RM323 million under the rated programme, of which the first tranche of RM153 million will mature on Feb 28, 2025, said MARC.

“The rating agency notes that YNH is in a technical default as it has failed to deposit the second monthly payment of RM6.1 million due on March 28, 2024, as part of the build-up in the reserve account.

“The trustee has granted a one-month grace period for YNH to deposit the payment by April 26, 2024,” it said.

The rating agency said it will closely monitor the developments in YNH to resolve its negative watch placement, mindful of the group’s precarious financial position that could trigger “multiple-notch downgrades” from its last rating if no timely progress is made to improve its liquidity position.

MARC noted that last month, YNH has re-designated independent non-executive director Khong Kam Hou as chairman for its audit committee and appointed Morison LC PLT as external auditor.

“It has entered into a sales and purchase agreement (SPA) with Sunway REIT to purchase its 163 Retail Park mall in Mont Kiara for RM215 million following the termination of an SPA with a third party.

“Other planned disposals, the 5.1-acre parcel in Desa Sri Hartamas and the AEON mall in Manjung, Perak, continued to be delayed, while unbilled sales from limited ongoing projects remain modest relative to its financial obligations,” said the rating agency.

The 5.1-acre Desa Sri Hartamas land was in the midst of disposal to Sunway Group, and both parties in February this year agreed to extend the deadline to fulfil condition precedent for a fourth time, pushing it to May 12.

Shares of YNH fell three sen or 5.9% to 47.5 sen on Monday, giving it a market capitalisation of RM251.27 million.