MARC has affirmed the ratings of Aragorn ABS Berhad’s (Aragorn) RM60.0 million Senior Class A CPs/MTNs, RM10.0 million Senior Class B CPs/MTNs (Senior Class CPs/MTNs), RM20.0 million Subordinated Class C MTNs and RM25.0 million Subordinated Class D MTNs (Subordinated Class MTNs) at MARC-1/AAA, MARC-1/AA, BB and B, respectively. The ratings reflect the quality of the property; the strong credit standing of the major tenant; the irrevocable and unconditional put and call options incorporated into the transaction with CapitaLand Commercial Limited (formerly known as CapitaLand Commercial and Integrated Development)(CCL) as the call option holder; and strong liquidity position of Aragorn underpinned by stable rental flows.

Under this transaction, Aragorn ABS Berhad (Aragorn), a bankruptcy remote special purpose vehicle, purchased a designated piece of land together with its building, Wisma Technip (Wisma Technip), from Mega Maju Sdn. Bhd. (MMSB). The sale of Wisma Technip was structured as a 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. The purchase was funded by proceeds raised from the issuance of up to RM115.0 million CPs/MTNs. Subsequently, all tenancy agreements entered into between MMSB and tenants of Wisma Technip were novated to Aragorn. Monthly rental payments into the revenue account at Aragorn forms the source of payment for coupons and senior expenses under the CP/MTN programme. The transaction incorporates a put and two call options exercisable by the trustee and CCL respectively, the proceeds of which representing the source of principal repayment for outstanding Senior Class CPs/MTNs.


The CPs/MTNs are backed by Wisma Technip, a 12-storey office building with a net lettable area of 233,021 square feet (sq ft) located on Jalan Tun Razak, in Kuala Lumpur’s Golden Triangle. More than 90% of the building’s total lettable area is 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’s net property income has been trending upwards attributable to the steady and increasing occupancy levels over the years coupled with increase in rental rates. A lease agreement of five years from 2007 to 2011 recently entered by Aragorn and TGSB mitigates lease rollover risk up to 2011, thus ensuring greater stability and predictability in Aragorn’s cash flows up to 2011. The risk of early termination prior to maturity of the lease, the transaction is mitigated by put and call options provided by CCL.

The transaction incorporates a put option in favour of the trustee which effectively mitigate refinancing and market risk as well as risks associated with high tenant concentration. CCL holds two call options, i.e. CPs/MTNs call option and Wisma Technip call option. The put option in respect of all outstanding Senior Class CPs/MTNs and the CPs/MTN call option in respect of all outstanding CPs/MTNs are exercisable upon declaration of event of default by the Trustee. Whilst the Wisma Technip Call Option held by CCL in respect of the building is exercisable at any time post issuance, allowing Aragorn to redeem all CPs/MTNs outstanding ahead of its scheduled maturity. MARC views CCL’s credit standing as strong being a wholly owned subsidiary of CapitaLand Ltd.


For the first 9 months since closing, Aragorn registered revenue and operating income of RM8.06 million and RM4.85 million respectively, in line with the initial projections. MARC applied LTVs of 51.3% and 59.9% for AAA and AA respectively. Based on information provided by the trustee, MARC estimates Aragorn’s DSCR and CFO ratios for the 6 months period ended December 2006 to be 6.2X and 3.3X for the Senior Class A CPs/MTNs and 5.3X and 2.8X for the Senior Class B CPs/MTNs, comfortably higher than the minimum DSCR requirement for their respective ratings.