MARC has reaffirmed the MARC-4ID rating of Pembangunan Brisdale Sdn Bhd’s (PBSB) RM55 million Murabahah Notes Issuance Facility (MUNIF). Concurrently, the rating has been placed on MARCWatch with a Developing Outlook. The rating reflects the weak sentiment towards the property development at Bandar Armada Putra which consequently resulted in the company’s weak financial position. The Developing Outlook is due to the uncertainty in the repayment of the final outstanding notes of the MUNIF where the repayment is contingent on the timely collection from certain sales proceeds which has been assigned to the MUNIF holder as well as the sale of an identified asset and receipt of the sale proceeds.

While carrying out the review on the outstanding MUNIF, MARC was not able to ascertain the latest progress on the property development at Bandar Armada Putra as no latest updates were provided by PBSB. However, we are of the opinion, the fact that PBSB had requested for a deferment on one of the repayment dates scheduled in June 2005, from the Facility Agent Abrar Discounts Berhad, suggests that there has been a lack of tangible progress at the property development site.

Under the original proposed restructuring scheme, proceeds from the sale of a North Port land were expected to have been used for the repayment of the MUNIF. To-date, the full amount of the cash proceeds has not been forthcoming and it remains to be seen as to whether the outstanding notes of the MUNIF will be repaid from the remaining proceeds.

Notwithstanding, during the period under review, PBSB redeemed and cancelled RM18.0 million of the MUNIF comprising the repayment of RM10.0 million in November 2005, which was originally scheduled to be paid in June 2005. However, following appeal from the issuer it was later deferred to September 2005 and subsequently to end-November 2005. The second repayment of RM8.0 million was done in December 2005. As at 4 January 2006, PBSB has redeemed and cancelled RM51.0 million of the RM55.0 million MUNIF. The remaining RM4.0 million, as per the revised sinking fund schedule should be redeemed at end-March 2006. We have been informed by the management of PBSB that the money for the remaining RM4.0 million is not expected to come from the sale of residential properties at Bandar Armada Putra but rather from several asset sale exercises and the timely collection of certain sales proceeds assigned to the MUNIF holder. However, it remains to be seen as to whether the proposed sale of the assets and the receipt of the proceeds would materialise before the first quarter of 2006.

PBSB recorded no revenue for FY2004; a further sign of the company’s severe situation in respect of the progress of the property development at Bandar Armada Putra. For the third year running, PBSB remained in the red albeit with a narrower pre-tax losses of RM2.4 million against a pre-tax loss of RM2.9 million in FY2003.

The lack of property development activities took its toll on the company’s cash flow position as PBSB registered a deficit in its net operating cash flow reversing the previous year’s positive cash flow position.