Horizon Hills Development Sdn Bhd - 2010

MARC has placed Horizon Hills Development Sdn Bhd’s (Horizon Hills) MARC-1ID(s) rating on its RM70 million Islamic Commercial Paper (ICP) Programme on MARCWatch Developing following a conditional takeover bid for Sunrise Berhad (Sunrise) by UEM Land Holdings Berhad (ULHB). Horizon Hills is a 50:50 joint venture between Gamuda Berhad (Gamuda) and ULHB’s 100%-owned subsidiary, UEM Land Bhd (UEM Land).

Concurrently, MARC has affirmed its AAAID(bg) rating on Horizon Hills' RM200 million Islamic Bank Guaranteed Medium Term Notes (IMTN) Programme. The rating on the IMTN continues to reflect the credit enhancement stemming from an unconditional and irrevocable guarantee by Public Bank Berhad (rated AAA/Stable on the basis of public information).

MARC is reviewing its public information corporate credit rating on ULHB to assess the impact of its takeover bid of Sunrise on its credit quality and the potential rating implications for credit support extended to Horizon Hills' ICP. The rating on Horizon Hills' ICP is based on the credit strength of Gamuda and UEM Land, both of which have provided unconditional and irrevocable undertakings in proportion to the size of their shareholdings to meet obligations under the ICP.

The takeover of Sunrise could have credit implications for the post-acquisition credit profile of UEM Land based on the final form of consideration received by Sunrise's shareholders. ULHB proposes to satisfy the acquisition cost of Sunrise's ordinary equity either through the issuance of new ordinary shares or redeemable convertible preference shares. While the impact of the takeover on the financial profile of UEM Land is less clear, MARC believes that the takeover is likely to result in an enhanced business position for UEM Land. The agency also believes that the takeover could pose meaningful integration risks.

MARC will take appropriate rating action when the takeover is resolved by the first quarter of 2011.

Major Rating Factors

Strengths

Challenges/Risks