RAM Ratings has assigned a preliminary rating of AAA/Stable to the proposed up to RM87.0 mil ASEAN Green Senior Class Medium Term Notes (Senior Class MTNs) to be issued under Eternal Icon Sdn Bhd's (the Issuer) RM400.0 mil MTN Programme. This will be the first ASEAN Green MTNs in Malaysia backed by an office property, a testament to the greater acceptance and adoption of the environmental, social and governance agenda. Proceeds raised from the issuance will be used to refinance all outstanding MTNs under the MTN Programme on 31 March 2023 (click here for more information).

Eternal Icon is a special-purpose vehicle set up to undertake the securitisation of Plaza33 (the Property), an integrated office tower located in Petaling Jaya. The Property is a multi-tenanted office building comprising two 14-floor towers, two levels of retail space and seven car park levels. 

Overall, we view Plaza33's asset quality as above average, with a RAM Property Score of O-3.70 (out of a maximum of O-5.00). Based on RAM's adjusted valuation of RM244.44 mil for the Property, the resultant loan to value ratio of 35.6% and stressed debt service coverage ratio of 2.97 times for the Senior Class MTNs commensurate with the rating assigned. 

The preliminary rating also considers the transaction's structural features, including a performance-based indicator to trigger the Property's early disposal if actual net property income falls below RM15.0 mil. Given lacklustre office market conditions, a tail period of three years has been incorporated to allow for disposal, if necessary. The transaction also includes a pre-funded debt service reserve account equivalent to the immediate next 12 months Senior Class MTNs coupon which can be used to meet coupon obligations, if necessary. 

Since its launch in 2014, Plaza33 has been recording above-industry average occupancy rate (AOR) and average rental rate (ARR) despite its sizeable net lettable area and a competitive office environment, reflec