Tropicana Corp Bhd's RM1.5 billion Islamic Medium-Term Notes (IMTN) Programme (Sukuk Wakalah) and RM2 billion Perpetual Sukuk programme ratings outlook remain negative, MARC Ratings said.
The rating agency has downgraded the IMTN and Sukuk Wakalah to AIS and A-IS from A+IS and AIS respectively.
MARC said that the rating decision reflects Tropicana's sustained poor financial performance and slower-than-expected asset disposals, which would have eased it's tightening cash situation relative to its near-term financial obligations.
In contrast, the ratings could be downgraded if the company's financial status continues to deteriorate, particularly its liquidity position to meet impending financial commitments, it said in a statement.
"The negative outlook highlights the lingering uncertainties on the timely conclusion of asset sales and/or refinancing initiatives to strengthen the balance sheet, and concerns on group financial performance achieving a meaningful turnaround given the still challenging outlook for the domestic property industry," it said.
The outstanding amounts under the Sukuk Wakalah and Perpetual Sukuk programme currently stand at RM1.5 billion and RM648 million, it said.
Tropicana's financial performance has been affected by weak property sentiments, which have been exacerbated by high construction material prices and interest costs, according to MARC.
The company's adjusted pre-tax loss for 2022 increased to RM102.3 million from negative RM74.2 million the previous year, despite a one-time RM298.6 million loss reserve from land parcel disposals.
Borrowings have remained high at RM4.43 billion (including Perpetual Sukuk), with term borrowings of RM428 million and rated IMTNs of RM645 million maturing by the end of 2023.
MARC said that the outlook will be raised to stable only when the ongoing deleveraging activities are completed and the company achieves long-term financial performance improvement.
Its rating concerns are mitigated by Tropicana's track record in the local property business and profits visibility from its unbilled sales of about RM2 billion.
"As at end-2022, ongoing developments carry a combined gross development value (GDV) of RM4.8 billion, mainly in the Klang Valley, with the overall average take-up rate standing at around 60 per cent. It has planned launches worth around RM3 billion GDV over the near term. We also note the completed inventory level declined to RM195 million as at end-2022 (end-2021: RM275 million) through concerted sales initiatives," said MARC.
