ABS Plantation Assets Bhd - 2007

MARC has reaffirmed the long term ratings of ABS Plantation Assets Berhad’s (ABSP) RM50.0 million Class A and RM45.0 million Class B Bai Bithaman Ajil Islamic debt securities (Notes) at AAAID and AAID respectively. The affirmed ratings reflect the satisfactory performance of underlying plantation assets with the net operating income (NOI) of RM17.1 million for the period under review, well above MARC’s assumed sustainable NOI of RM13.5 million. Additionally, the serial redemption of Class A and B notes provides for progressive reduction in Class A and B notes’ loan-to-value (LTV) ratios during the tenure of the transaction. At maturity, of the RM95.0 million Class A and Class B notes, 53.9% or RM51.2 million would have been redeemed using the semi-annual lease collections.  Since transaction close, actual LTVs for Class A and Class B Notes have declined to 40.9% and 79.3% respectively as at September 2007 and is expected to reduce further to 39.6% and 77.2% respectively by March 2008.

The plantation assets were acquired by ABSP, a bankruptcy remote special purpose vehicle, with the proceeds from the Notes and subordinated debt issuance, and subsequently leased back to the sellers. The sale of plantation assets has been structured as true-sale for legal purposes with the rights in, title to and interest in the plantation assets being transferred to ABSP. Periodic lease payments form the ultimate source of debt service for the rated Notes, and provide the means to amortize 70% and 36% of the nominal value of Class A and Class B notes during the tenure of the transaction. MARC has not placed any weight on the guarantee provided by Multi Vest Resources Berhad (Multi Vest) to the lease payments payable by the lessee. Multi Vest is the holding company of Benta Plantastions Sdn Bhd (BPSB).

The assets securitised are the plantation assets of BPSB and its subsidiaries. The plantation assets comprise approximately 8,893.42 acres of plantation estate land, mill and other identified machineries used by the sellers, in the business operations.  ABSP has leased the plantation assets to the sellers under a lease agreement (on net lease basis) for up to 30 years.  For the period under review, the securitised plantation assets registered a NOI of RM17.1 million, which is 26.7% higher than MARC’s assumed sustainable NOI of RM13.5 million, attributed mainly to higher crude palm oil (CPO) and palm kernel (PK) prices.

As at August 2007, matured oil palm occupied 97.0% of total planted area, the balance comprising immature areas.  Trees in their prime (between 8 to 15 years) made up 27.6% while over-aged palms (of over 25 years) made up of 4.9% of the total planted area. Fresh Fruit Bunch (FFB) production from the securitised estates has been steadily increasing over the years, allowing BPSB to be less reliant on external FFB. For FY2006, BPSB’s mill processed 68,729 tonnes of its own FFB, 14.4% up from the previous year. The estate’s FFB yield has been consistently above industry average, ranging from 20.0 MT/ha to 22.0 MT/ha per annum in the last five years while the oil extraction rate (OER) is in line with the industry average at 19.0%.