Vast Winners Sdn Bhd - 2008

Vast Winners Sdn Bhd (VWSB) is a bankruptcy remote special purpose vehicle established for the purpose of issuing up to RM650.0 million Medium Term Notes (MTNs). The proceeds of the issuance will be used to finance the purchase of 510,418 sq ft of strata floor area within shopping centre, Sungei Wang Plaza (SWP or property), together with 1,310 parking bays and rights under all tenancy agreements in relation to the property, to meet future capital expenditure and working requirements for SWP and all expenses incurred in connection with this transaction. MARC has assigned ratings of AAA, AA and A+ to VWSB’s RM190.0 million Class A MTNs, RM40.0 million Class B MTNs and RM20.0 million Class C MTNs (Senior Notes), respectively. The ratings reflect the quality of the property, the property’s well diversified tenant mix and high occupancy rate, call options granted to CapitaLand Retail Limited (CRTL) to redeem outstanding senior notes upon the occurrence of a trigger event or event of default in addition to an irrevocable and unconditional undertaking to cover shortfalls in the Debt Service Reserve Account, and the relatively low loan-to-value (LTV) ratios used to size the Senior Notes. The LTV ratios for the Class A, Class B and Class C MTNs are 41.1%, 49.8% and 54.1%, respectively, based on MARC’s discounted cash flow valuation of RM462.1 million for the property.  The Subordinated Class D MTNs of up to RM400.0 million is unrated.

The MTNs have been structured on an interest-only basis with no amortisation of principal prior to the maturity date. Monthly rental income forms the source of coupon payments for the Notes and all operating expenses. The Notes will have bullet maturities with expected and legal maturity of 5.5 years and 7.0 years, respectively. The 1.5 year tail period is expected to provide sufficient time for the Trustee to dispose the property, proceeds of which forms the source of principal repayment for the Notes.

In November 2007, Exquisite Phoenix Sdn Bhd (EPSB), an associate company of CapitaLand Limited (CapitaLand Ltd) entered into a sale and purchase agreement (SPA) with Sungei Wang Plaza Sdn Bhd (SWPSB) to acquire the property for a total consideration of RM595.0 million. The sale of the property has been structured as a true-sale for legal purposes. EPSB’s rights and obligations under the SPA will be novated to the issuer upon completion of the sale.

The transaction incorporates two call options in favour of CRTL, which will provide the requisite funds to redeem all outstanding Senior Notes upon the exercise of either call option. The Senior MTNs Call Option is exercisable upon occurrence of a trigger event or an event of default while the Property Call Option (PCO) in respect of the property is exercisable at any time post issuance. Unless a trigger event or an event of default occurs, the exercise of the PCO is conditional upon the property being disposed into a real estate investment trust. MARC views CRTL’s credit standing as very strong, premised on of its parent-subsidiary relationship with CapitaLand Ltd.

The property to be securitised represents 61.9% of SWP’s total strata area and 56.2% of total net lettable floor area.  As of October 2007, the occupancy rate stood at 99.9% with anchor tenants, Parkson Grand departmental store, Giant Supermarket and KFC collectively contributing approximately 19.5% of the property’s total rental income. Net operating income (NOI) has been trending upwards over the last three years attributable to the property’s high occupancy rate and rental uptrend.