The assigned rating of AID (flat) reflects Maxisegar Sdn Bhd’s (MSB) strong competitive position and good location of its property development; tempered by its vulnerability to adverse development in the property markets.

MSB, a wholly owned subsidiary of Talam Corporation Berhad (TCB), one of the largest property developers in the country, is principally involved in property development activities and investment holding. Its flagship development in Pandan Indah 1 has been well received while its other developments in Saujana Damansara and Bukit Sentosa have to date recorded strong take-up rates. Under the issue structure, progress billings from six phases within the on-going Taman Puncak Jalil (TPJ) development have been assigned to the Facility as the source of repayment for the BaIDS. The cumulative gross development value of these six phases is approximately RM421.03 million with most phases expected to be launched in the first quarter of 2004. Based on historical take-up rates for past phases launched in TPJ, MARC expects take-up rates for the six phases to be strong in view of the attractive pricing, location and development mix of TPJ. As a condition precedent under the issue structure, total receivables from the secured sales under the assigned phases must be at least 1.43 times the Facility’s size.

MSB’s track record of timely completion of projects and the strong support from its holding company, TCB, in terms of management and expertise mitigate construction risk to a certain extent. Funding for the construction works in respect of TPJ is controlled by the Security Agent, with withdrawals allowed only against relevant certification of works done.

Refinancing risk will be largely mitigated by the serial redemption payment structure of the BaIDS. The maintenance of a six-month liquidity buffer in a debt service reserve account will mitigate liquidity risk. MARC’s sensitivity analysis on the projected financials of the assigned phases reveals a resilient cash flow position under various assumptions of delays in progress billings.

With the full repayment of the RM900 million Islamic debt facilities in July 2003, MSB’s current debt-equity ratio is low at 0.06 times. The pro-forma debt-equity ratio will increase to 1.09 times upon the issuance of the proposed BaIDS. Under the issue structure the debt-equity ratio is capped at 2.50 times.