KUALA LUMPUR (Nov 6): YNH Property Bhd’s (KL:YNHPROP) sukuk reserve account shortfall has triggered a technical default, prompting MARC Ratings to downgrade its RM700 million Sukuk Wakalah programme to B-IS, from BB-IS.
The rating agency also placed the programme on MARCWatch Negative, citing the property developer's weakened liquidity position, poor internal cash flow generation, continued reliance on asset sales to meet debt obligations, and limited earnings visibility, it said in a statement on Friday.
According to MARC Ratings, YNH is required to progressively accumulate 50% of its RM170 million sukuk maturity ahead of its Feb 26, 2027 due date.
However, as at Oct 27, 2026, the reserve account balance stood at RM54.4 million — RM6.8 million short of the required RM61.2 million threshold.
“The shortfall is required to be rectified within the 30-day remedy period to avert an event of default,” the rating agency said.
“While YNH has indicated its intention to remedy the shortfall within the permitted period, the occurrence of the reserve-account shortfall nonetheless underscores the company’s constrained liquidity and limited capacity to meet its funding requirements through internally generated cash flows,” it added.
The MARCWatch Negative rating highlights significant uncertainty surrounding YNH’s ability to redeem its RM170 million sukuk maturity falling due on Feb 26, 2027.
The rating agency emphasised that repayment remains substantially reliant on the timely completion of planned asset disposals.
Specifically, redemption hinges on the proposed RM170 million sale of a 5.1-acre land parcel in Desa Sri Hartamas to Sunway Bhd’s (KL:SUNWAY) unit, Sunway Living Space Sdn Bhd.
The sale, first announced in May 2023, has faced repeated delays.
In September 2026, YNH’s unit Kar Sin Bhd signed a sixth supplemental agreement extending the deadline to Dec 31 to satisfy outstanding conditions precedent, following earlier complications involving a registrar's caveat and land title issues.
While the transaction is currently expected to become unconditional by the end of this month, with completion targeted for Jan 2027, failure to meet the outstanding conditions by Dec 31 would give Sunway Living Space the right to terminate the deal.
After settling the land’s outstanding bank loan of approximately RM65 million, net proceeds of around RM105 million are expected to be allocated towards the sukuk redemption.
However, given the tight timeline before the February 2027 debt maturity, MARC Ratings warned that YNH has "limited headroom to absorb any further delays."
YNH is also selling a land parcel along Jalan Sultan Ismail in Kuala Lumpur to a unit of Chin Hin Group Property Bhd (KL:CHGP) for RM455 million, with completion expected by January 2027.
The cash proceeds are intended to fully redeem YNH's RM350 million outstanding unrated perpetual bond and settle outstanding coupon obligations, according to MARC Ratings.
While the two disposals could provide substantial liquidity relief and help reduce the group's debt, MARC Ratings stressed that YNH's immediate financial position remains highly dependent on their timely completion.
The rating agency also noted that YNH’s weak operating performance offers limited support to its overall liquidity.
Group revenue fell to RM106.9 million in FY2026, reflecting limited progress billings from ongoing projects.
The developer’s active development pipeline remains limited, comprising the Solasta Dutamas high-rise project in Kuala Lumpur and a shoplot development in Manjung, Perak.
"The limited development pipeline constrains near-term earnings and operating cash flow generation, reducing YNH’s capacity to rebuild liquidity organically," MARC Ratings said.
YNH shares ended one sen or 3.45% lower at 28 sen on Friday, valuing the property developer at RM148.12 million.