RAM RATINGS AFFIRMS AAA/STABLE RATING OF MIDCITI'S RM3 BLN SUKUK

KUALA LUMPUR, June 2 (Bernama) -- RAM Rating Services Bhd (RAM Ratings) has affirmed the AAA/Stable rating of Midciti Sukuk Bhd’s (Midciti) RM3 billion Sukuk Murabahah Programme (2014/2044) in view of KLCC Real Estate Investment Trust’s (KLCC REIT) superior financial profile and stable operating performance.

Incorporated as the funding conduit of KLCC REIT with no operations of its own, Midciti depends on inter-company transactions with the REIT to meet its obligations under the sukuk programme, RAM Ratings said in a statement today.

It said the rating also considered KLCC REIT’s close linkage with its ultimate parent, Petroliam Nasional Bhd (Petronas).

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“In the unlikely event of financial distress, RAM Ratings views that KLCC REIT is highly likely to receive extraordinary support from Petronas.

“We view the quality of these assets to be exceptional underpinned by their strategic location and long-term triple-net lease agreements signed with Petronas that provide the REIT with earnings certainty and a robust net property income (NPI) margin of 95 per cent,” it said.

A nine per cent contractual rental step-up which takes effect from December 2023 and October 2024 at Menara 3 Petronas and Petronas Twin Towers, respectively, will further boost KLCC REIT’s earnings.

“The REIT’s superior financial profile is evident from its low gearing and leverage ratios of 0.17 times and 0.14 times, respectively,” it said.

As at end-December 2022, total financing was largely unchanged at RM1.38 billion.

“Thanks to stronger earnings at Menara 3 Petronas’ retail podium that surpassed pre-COVID-19 levels owing to higher average rental rates, KLCC REIT’s robust fixed charge coverage and funds from operations financing coverage improved further to a respective 8.52 times and 0.41 times in the financial year (FY) Dec 2022 as compared with 8.31 times and 0.38 times respectively in FY Dec 2021.

“These factors afford considerable rating headroom to withstand the impact of continued headwinds, especially on the retail side which contributes about five per cent of the portfolio’s NPI,” it added.

-- BERNAMA