MARC has downgraded the long-term ratings of Ambang Sentosa Sdn. Bhd.’s (ASSB) RM272 million and RM226 million of class B and class C Al-Bai Bithaman Ajil Islamic debt (BaIDS) asset-backed securities (ABS) facility. The downgrades are premised on the construction delays experienced at the Taman Puncak Jalil development brought about by the repatriation of illegal foreign workers in the last quarter of 2004 which resulted in significant reduction in total workforce up to date of review as well as the Federal Government’s concern over hill slope development; and, building materials shortage arising from the high steel bar prices in the second half of 2004. The construction delay resulted in significantly lower progress receipts leading to a shortfall in the BaIDs redemption account balance as compared to the original projection. Nevertheless, BAIDSholders have agreed, on 8th July 2005, for the remaining class B and C BaIDs to be restructured with RM100 million of class B BaIDs to be redeemed on 28th July 2005 and each of the remaining Class B and Class C BaIDs amounting to RM272 million and RM226 million to be redeemed one year later than their original maturity date (i.e. on 28th July 2006 and 28th July 2007). Injection of additional assets with higher sales value; removal of assets with higher construction and completion risks; and IJM Construction Sdn. Bhd stepping in as the construction manager are positive rating considerations. In addition, the transaction benefits from additional credit and liquidity support provided by the cash reserves in EA 2 and EA 3.

ASSB is a special purpose, bankruptcy-remote company incorporated in Malaysia for the purpose of purchasing from the originator, Maxisegar Sdn. Bhd. (MSB), the latter’s rights, title and interest in the balance of receivables under a selected pool of Sale and Purchase Agreements (SPAs) entered into between the originator and end-purchasers. The SPAs are in respect of the sale of residential and commercial units developed by MSB in Taman Puncak Jalil and Saujana Damansara. Purchase of receivables was funded via the issuance of the BaIDS by ASSB.

The BaIDS are backed by secured sales (i.e. assets)
of approximately RM1,759.1 million, expressed in terms of assigned value, from the two projects, representing overall security coverage of more than one and a half times. For the purpose of the securitisation transaction, the assets have been divided into three classes, based upon the status of end-financing facilities, if any, obtained by end-purchasers to settle the balance of the unit purchase price, on closing of the transaction. Class A and class B assets are those where end-financing have been secured. Credit risk is substantially mitigated as end-financing facilities are required to be secured in respect of at least 95% of the initial asset pool at the expiry of six months from the close of the transaction. As at 30 April 2005, approximately 98.2% of the securitised pool comprised of class A (81.5%) and class B assets (16.7%).

The unfavourable developments in the construction and property development industries have indeed affected the Taman Puncak Jalil development with construction falling behind schedule by about six months. The Saujana Damansara development is not affected as the development is 100% complete. As at 30 April 2005, the overall status of completion for Taman Puncak Jalil is 58.8%. Based on revised cashflow projection, approximately 68.7% of the assigned phases will be fully completed by 31 December 2006 (i.e. an overall completion of 93.0%) with the remaining phases to be completed before June 2007. The remaining construction cost is funded by funds in EA 1 which amounted to RM63.18 million as at 30 April 2005. The balancein EA 1 is RM3.16 million less than the required minimum of RM66.3 million with the shortfall arising from additional projects being added into the portfolio without additional funds being added into EA 1. Nevertheless, the shortfall is more than sufficiently covered by the balance in EA 3 which amounted to RM6.79 million as at 30 April 2005.

As at 30 April 2005, the cash reserve in EA 2 amounted to RM17.92 million which translates to a shortfall of RM0.1 million from the required minimum of RM18.02 million. Similar to EA 2, the shortfall is more than sufficiently covered by the balance in EA 3.