Land sale holds key to YNH’s recovery

YNH Property Bhd’s decision to defer RM34.4mil in coupon payments on its perpetual securities has put the spotlight firmly back on its balance sheet.

While the move is allowed under the terms of its trust deed, it has also prompted investors to take a closer look at the timing of the company’s proposed RM455mil land sale and whether it could have come sooner.

The property developer announced on July 23 that it would defer coupon payments on two outstanding perpetual securities tranches, with payments originally due on July 30 and Aug 7 now pushed back to January and February next year.

It said the deferment would preserve liquidity while it awaited completion of the proposed disposal of its prized freehold land along Jalan Sultan Ismail, Kuala Lumpur, which was announced on July 8.

Proceeds from the sale would be used to fully redeem the perpetual securities and settle all outstanding coupon obligations, including accrued interest, according to the company.

The explanation provides investors with a clearer picture of how YNH intends to address one of the most expensive parts of its capital structure.

At the same time, the sequence of events has raised questions over whether the disposal could have been initiated earlier, given that the coupon payment schedule and the company’s refinancing needs would have been known well in advance.

The first deferred coupon payment amounted to RM7.87mil, while another RM26.54mil was due a week later.

Although the amounts are modest compared with the proposed RM455mil disposal, the announcement came less than a month before the first payment was scheduled.

For investors, that timing is difficult to ignore.

Expensive source of funding

YNH’s financial position has become more challenging over the past two years.

As at March 31, 2026, the group had RM405.97mil in borrowings and cash and short-term deposits of RM22.4mil.

On top of that, it had RM345.9mil in perpetual securities issued in 2019 and 2020.

The perpetual securities were initially an attractive source of long-term funding.

However, they carried a step-up feature if they were not redeemed after five years.

Because YNH did not redeem the instruments when they first became callable, the coupon rate has increased to 9.85% per annum and will continue rising by one percentage point each year, up to a maximum of 15%.

That has significantly increased the cost of maintaining the securities.

The latest deferment is also the second this year, following an earlier postponement in January.

While the trust deed allows the company to defer coupon payments, repeated deferments inevitably draw attention to the company’s cash management and refinancing plans.

The Jalan Sultan Ismail site has long been regarded as one of YNH’s most valuable assets.

The company acquired the 2.61-acre freehold parcel in 2004 for RM109.87mil.

Located opposite Concorde Hotel in Kuala Lumpur’s Golden Triangle, the site was earmarked for Menara YNH, a mixed-use commercial development with an estimated gross development value of RM4bil comprising serviced apartments, a hotel and retail space.

More than two decades later, the land remains undeveloped despite having an approved development order valid until June 2027.

YNH has described the disposal as part of its capital recycling strategy, allowing it to unlock value from a strategic asset while strengthening its financial position.

The transaction would see Chin Hin Group Property Bhd’s 70%-owned subsidiary acquire the land for RM455mil.

YNH will receive RM409.48mil in cash, RM45.5mil worth of redeemable preference shares and retain a 10% equity interest in the project company, enabling it to participate in the project’s future upside without assuming development risks.

The proposed disposal appears to address several immediate financial priorities.

Of the cash proceeds, RM375mil has been earmarked to redeem the perpetual securities, while RM34.48mil will be used to partially settle real property gains tax arising from the transaction.

If completed, the disposal would substantially reduce YNH’s financing costs while improving its liquidity position ahead of RM170mil in Islamic debt maturing next February.

Execution remains the key risk

The transaction, however, is not yet complete.

Chin Hin Group Property intends to finance the acquisition through RM318.5mil in term borrowings and a RM91mil shareholder advance from another shareholder in the acquisition vehicle.

As with many property transactions of this size, completion is subject to financing and the fulfilment of the agreed conditions.

For YNH, this means its balance sheet recovery now depends largely on the successful completion of the disposal.

Until then, the company continues to carry the perpetual securities together with its existing borrowings.

This is why investors are likely to remain focused on the progress of the transaction over the coming months.

The market responded positively when the disposal was first announced.

YNH shares rose more than 8% on the day of the announcement, suggesting investors viewed the proposed transaction as a meaningful step towards addressing the company’s debt position.

The announcement also provided greater visibility on how management intends to redeem the perpetual securities, offering reassurance that there is a defined plan to reduce one of the group’s most expensive financing obligations.

Whether that optimism is sustained will depend largely on execution.

Beyond the immediate refinancing exercise, the proposed disposal also raises broader questions about capital management.

The Jalan Sultan Ismail parcel has been part of YNH’s landbank for more than 20 years.

With financing costs on the perpetual securities rising after the fifth anniversary, some investors may wonder whether monetising the asset earlier could have reduced the financial burden now facing the company.

That does not diminish the strategic value of the transaction.

If completed, the sale would significantly improve YNH’s financial flexibility, reduce gearing and remove an increasingly costly funding instrument from its balance sheet.

At the same time, Chin Hin Group Property gains access to one of the few sizeable freehold development sites remaining within Kuala Lumpur’s Golden Triangle, where it plans to undertake a RM3.6bil mixed-use development.

For both companies, the proposed deal has clear strategic merits.

For YNH, however, the disposal has taken on added significance because it is now central to its refinancing strategy.

The coming months are, therefore, likely to be more about execution.

Investors will be watching closely for signs that the transaction is progressing as planned and that the expected proceeds are received on schedule.

Should the disposal proceed as expected, YNH would be in a much stronger position to reduce its debt burden and move beyond a period of elevated financing costs.

Until then, the market’s attention is likely to remain fixed on whether the deal can be completed in time to deliver the balance sheet relief the company is counting on.