The assigned rating of AID and A-ID to Class A and B of the proposed BaIDS respectively reflects OSK Property Holdings Berhad (OSKP)’s favourable flagship development – Bandar Puteri Jaya (BPJ) located in Sungai Petani, Kedah and its strong presence in that area; tempered by its vulnerability to adverse development in the property markets. The enhanced AID rating assigned reflects secured sales receivables identified as repayment source that are accorded to Class A BaIDS, which must be at least 1.43 times at all times.

OSKP, listed on the Main Board of Malaysia Securities Exchange Berhad (MSEB), is the property arm of OSK Holdings Berhad, an establish player in the local stockbroking industry. OSKP’s flagship development - BPJ, developed as an integrated garden township, has been well received by recording an average take-up rate of 85.2% for its launched phases. Besides BPJ, OSKP is involved in other property developments, namely Seremban 3 and a new project situated at Mukim of Sungai Buloh through joint-ventures.

Under the issue structure, sales receivables for launched phases of BPJ together with future progress billings from six parcels of land within Phase 3 of BPJ have been identified as the main source of repayment of the BaIDS. As at November 2003, the total sales receivables of BPJ totalled RM72.8 million whilst the cumulative gross development value of the identified phases under phase 3 is approximately RM793.50 million. Phase 3 of BPJ, to be progressively launched from January 2004 onwards, is expected to achieve good take-up rates in view of strong
historical take-up rates, attractive pricing, good location within Sungai Petani and its development mix. As a condition under the issue structure, total receivables from the group sales under the assigned phases must be at least 1.43 times of the Class A BaIDS outstanding. However, should there be a shortfall in the remaining billings from the assigned phases, OSKP shall utilize remaining billings from its other property developments to meet the said security coverage ratio of Class A BaIDS. Other than the BPJ development, OSKP is anticipated to reap benefits from its joint ventures in Seremban 3 and up-coming Sungai Buloh developments going forward; providing additional revenue source to the group.

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 and reserve account respectively will mitigate liquidity risk. MARC’s sensitivity analysis on the projected financials of OSKP reveals a resilient cash flow position under various assumptions of delays and discounts in progress billings.

Other than improved profitability, OSKP’s capital structure has been solid. Upon issuance of the RM100 million BaIDS, OSKP’s pro-forma debt-equity ratio will touch 0.64 times. Under the issue structure the debt-equity ratio is capped at 1.25 times.