Legolas Capital Sdn Bhd - 2009

MARC has affirmed the ratings of MARC-1(bg) / AAA(bg) on Tranche A and MARC-1(bg) / AA+(bg) on Tranche B of Legolas Capital Sdn Bhd’s (Legolas) RM105.0 million Commercial Paper/ Medium Term Notes (CP/MTN) Programme and RM110.0 million CP/MTN Programme respectively. The ratings on Tranche A reflect MARC’s AAA/MARC-1 public information financial institution ratings on Malayan Banking Berhad (Maybank) and the ratings of Tranche B reflect MARC’s AA+/MARC-1 public information financial institution ratings on United Overseas Bank (Malaysia) Berhad (UOBM). Maybank and UOBM have unconditionally and irrevocably guaranteed Tranche A and Tranche B respectively. MARC’s ratings on Maybank have incorporated its leading domestic market position, sound asset quality, resilient core earnings and restored capital strength. MARC’s ratings for UOBM took into consideration its relatively healthy capitalisation and strong franchise in its chosen business segments. The ratings carry a stable outlook.

Legolas is a special purpose vehicle incorporated to finance the development of the RM560.93 million (US$156 million @ RM3.5957) One Mont’ Kiara project, a mixed-commercial development in the Mont’ Kiara vicinity in Kuala Lumpur. The One Mont’ Kiara together with Ireka’s high end residential developments,  i-Zen@Kiara1 and i-Zen@Kiara2, were planned as an integrated development based on the concept of work, recreation and living within the same vicinity. Comprising a 33-storey office suite block, a 20-storey office tower and a five-storey retail complex with a four-level basement car park, construction has achieved a 66% completion rate as at August 31, 2009 and is slated for full completion by mid-2010.  Since its launch in December 2006, the 33-storey office suite block has recorded a 76% take-up rate translating to a sales value of RM143.69 million with another RM52.1 million remaining outstanding as unbilled sales as at June 30, 2009. MARC understands that the Ireka Group is expected to take-up certain portions of the 20-storey office tower as its new headquarters while negotiations for the retail mall are ongoing with key names in the retail sector as potential anchor tenants.

Ireka initiated a group-wide restructuring exercise resulting in the transfer of its property assets to UK-based Aseana Properties Limited (ASPL), with ASPL having an 85.1% stake in Legolas and a 100% stake in Ireka Land Sdn Bhd (ILSB), the company undertaking the construction and development of One Mont’ Kiara.  Ireka maintains a 23.2% equity interest in ASPL. MARC believes that the recent changes in the shareholding structure have had no material impact on the management and the business direction of ILSB and Legolas with regard to the One Mont’ Kiara project, with Ireka, through its other associates and subsidiaries, continuing to provide key support functions.

Legolas has advanced the proceeds raised from the issuance of CP/MTN to ILSB for which it receives interest payments that are equal to the interest payable on the CP/MTN Programme. As at March 31, 2009 (FY2009), the amount owing by ILSB to Legolas stood at RM168.22 million, including accrued interest of RM16.2 million (FY2008: RM115.79 million). MARC expects ILSB to have sufficient liquidity to fund Legolas’s March 2011 Tranche A repayment of RM30 million from internally generated sources.

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