A rating of A (A flat) has been assigned by MARC to WCT Land Berhad’s (WCTL) Convertible Redeemable Debt Securities (CRDS) of a nominal value of RM132 miliion. The CRDS will be utilised to part refinance existing advances from its major shareholder, WCT. As part of a corporate exercise involving the acquisition of Bescorp Industries Berhad (BIB) (Special Administrators appointed) by WCTL, WCT will in turn use a portion of the CRDS to repay amounts owing to creditors of BIB via Pengurusan Danaharta Nasional Berhad.

WCTL, a wholly owned subsidiary of WCT Engineering Berhad (WCT) (listed on the main board of Bursa Malaysia Securities Berhad) is primarily involved in property development activities with ancillary income from its property investment and investment holding activities. Its maiden property development, Bandar Bukit Tinggi (BBT) 1 and 2, which are strategically located at the crossroads of Southern Klang, Selangor, have been identified as the primary sources of repayment of the CRDS. The rating reflects the favourable demand and strong historical take-up rates for the mixed development under BBT 1 and 2. BBT 1 and 2’s prime location which is perceived as the new commercial hub of Klang; its accessibility by six major highways; the presence of two retail hypermarkets (Tesco and Giant); and WCTL’s timely delivery of quality properties are positive features that will augur well for the overall demand of the said developments.

BBT 1 and 2 are expected to support WCTL’s revenue base until the year 2008 with proceeds peaking in 2005 and 2006 on the back of substantial locked-in sales and the expected positive and sustainable demand for the BBT developments. MARC expects cash flow protection measures to remain adequate throughout the tenure of the Facility. MARC’s sensitivity analysis on WCTL’s projected cash flows reveals a resilient cash flow position under various scenarios of delays in progress billings and discounts on projected sales proceeds.

A further positive rating factor is the provision of a corporate guarantee by WCTL’s parent company WCT which entails an undertaking by WCT to provide monies to WCTL to redeem the CRDS in the event that WCTL is unable to do so. As redemption is at the option of WCTL, WCT’s potential exposure under such a corporate guarantee will be contingent on the possibility that the CRDS will be fully or partially converted to equity at the maturity of the Facility.

Driven by the increase in progress billings from BBT 2 on the back of good demand from new launches, WCTL’s profitability depicted an uptrend since FY2002. In tandem with that, the cash flow protection measures have been improving. The pro-forma debt-equity level is expected to remain below one, providing some measure of flexibility to WCTL’s future financing needs. The debt leverage position is capped at 2.5 times under the issue structure.