Under this transaction, a bankruptcy remote special purpose vehicle, Aragorn ABS Berhad (Aragorn), will purchase a designated piece of land together with its building, Wisma Technip, by issuing up to RM115.0 million CPs/MTNs; renting the property to tenants for the benefit of the senior noteholders; and utilising rental collections towards making coupon payments. Monthly rental payments into the revenue account at Aragorn forms the funding source for coupons and senior expenses under the CP/MTN programme. The transaction incorporates a put and two call options exercisable by the trustee and CapitaLand Commercial and Intergrated Development Ltd (CCID) respectively, the proceeds of which representing the source of principal repayment for outstanding senior CPs/MTNs. The sale of Wisma Technip has been structured as true-sale for legal purposes with the seller’s rights in, title to and interest in the property and related security being legally transferred and assigned to Aragorn. Upon completion of sale, the lease (tenancy) agreements will be novated to Aragorn.

MARC has assigned ratings of MARC-1/AAA, MARC-1/AA, BB and B to Aragorn’s Senior Class A CPs/MTNs, Senior Class B CPs/MTNs, Subordinated Class C MTNs and Subordinated Class D MTNs respectively. The ratings reflect the quality of the property; its tenancy profile; the irrevocable and unconditional put and call options incorporated into the transaction which essentially mitigates risks associated with tenant concentration; and the strong credit standing of the call options holder, CCID. The CPs/MTNs have been structured with bullet maturities at the end of the seventh year from issuance.

Under the proposed transaction, Aragorn will purchase Wisma Technip from Mega Maju Sdn. Bhd. (MMSB), a subsidiary of Singapore based Goldhill Group.

The asset to be securitised is Wisma Technip, a
12-storey office building with a net lettable area of 233,031 square feet (sq ft) located on Jalan Tun Razak which is in Kuala Lumpur’s Golden Triangle. The building is predominantly occupied by Technip Geoproduction (M) Sdn Bhd (TGSB), a company which is part of the Technip Group, a multi-national corporation involved in the field of oil, gas and petrochemical engineering, construction and services. Currently fully occupied, the building’ net property income has been trending upwards with the exception of FY 2004 with net operating income registering slight decline of 4.5% to RM7.3 million. The trend is attributable to the steady and increasing occupancy levels over the years coupled with increase in rental rates. TGSB currently occupies 97% of the net lettable area of the building.

Under the proposed transaction, Put Option in favour of the trustee and CPs/MTNs Call Option in favour of CCID (both options being irrevocable and unconditional), the former in respect of outstanding senior CPs/MTNs and the latter in respect of all outstanding CPs/MTNs have been incorporated thus mitigating refinancing and market risk as well as risks associated with tenant concentration. Wisma Technip Call Option in favour of CCID in respect of the building exercisable at any time post issuance, allows Aragorn to redeem all CPs/MTNs outstanding ahead of its scheduled maturity. MARC views CCID’s credit standing as very strong being a wholly owned subsidiary of CapitaLand Ltd.

MARC has applied LTVs of 52.2% and 60.6% for AAA and AA respectively. Based on base case projections, the cashflow remains healthy with minimum DSCR at 2.26 and 1.91 times for Senior Class A and Senior Class B respectively. Based on stress test performed, the transaction is able to withstand reduction in occupied space by 29.3% with Wisma Technip generating adequate cash flows to service coupon on Senior Class A and Senior Class B CPs/MTNs.