Friday, Apr 25, 2003
MARC has affirmed the long-term Islamic corporate debt rating of A-ID (A minus, Islamic Debt Securities) and short-term Islamic corporate debt rating of MARC-3ID assigned to Europlus Corporation Sdn Bhd’s (ECSB) RM250 million Al-Bai Bithaman Ajil Islamic Debt Securities (BaIDS) and RM350 million Murabahah Underwritten Notes Issuance Facility (MUNIF) respectively. The affirmed ratings reflect the strength of the issue structure under which secured sales from specific property development projects have been earmarked for the redemption of the respective debt facilities. The ratings are, however, moderated by the restructuring of the MUNIF’s SFA payment schedule and the group’s vulnerability to adverse developments in the property market.
Separate sinking fund accounts (SFA) have been established under the BAIDS and MUNIF facilities to capture the secured sales proceeds for the redemption of the respective debts. The gradual accumulation of funds in the SFAs helps to mitigate redemption risk under the issue structures. The MUNIF’s SFA payment schedule was restructured in early 2003 as ECSB, in prior months before the scheduled SFA date, was under severe cash flow constraints resulting from delays in construction work, hence delaying its first scheduled MUNIF SFA payment of RM70 million due in October 2002. Delays in construction work were primarily attributed to labour shortage problems. The expiry of the amnesty period for repatriation of illegal foreign workers in July 2002 enforced by the Malaysian Government resulted in the exodus of foreign workers working in various developments under the ECSB Group. Nevertheless, the locked-in sales level from developments secured under the MUNIF issue remains positive and substantial. Additional liquidity buffers are also provided under the issue structure where in the event the aggregate value of sale proceeds should fall below 1.43 times of the outstanding facility, ECSB is obliged to procure the assignment of proceeds from other developments so as to maintain the 1.43 times coverage. Furthermore, upon the full redemption of the BAIDS, ECSB undertakes to assign all remaining proceeds from both projects to the MUNIF’s SFA as additional liquidity buffer.
As at end December 2002, ECSB’s RM250 million BAIDS issue was backed by RM198 million (equivalent to 2.8 times the BAIDS issue, after netting off the balance in the SFA at the same date) of total receivables from secured sales of the Putra Perdana and Ukay Perdana projects; substantially mitigating market risks. Sales performances to date of the said projects have been commendable, reflecting the favourable locations, large residential component of respective developments and competitive pricing of properties.
Secured sales proceeds from five other property developments, namely Bukit Beruntung I, II & III, Sunway Perdana, Kinrara Section 3 and Pulau Melaka, serve as the source of repayment of ECSB’s RM350 million MUNIF. The total receivable from secured sales as at February 2003 amounted to RM463 million (equivalent to 1.43 times the MUNIF issue, after netting off the balance in the SFA). The MUNIFholders’ exposure is hence adequately covered by the secured sales, despite the above average market risks of the respective developments.
ECSB posted a strong growth in pre-tax profit of 45.6% to RM76.4 million during FY2002, driven by a 38% increase in group earnings from sale of properties to RM492.4 million. In FY2002, the group’s debt leverage improved to 1.38 times (after adjusting for credit balances in the SFAs) from 2.18 times previously.
Separate sinking fund accounts (SFA) have been established under the BAIDS and MUNIF facilities to capture the secured sales proceeds for the redemption of the respective debts. The gradual accumulation of funds in the SFAs helps to mitigate redemption risk under the issue structures. The MUNIF’s SFA payment schedule was restructured in early 2003 as ECSB, in prior months before the scheduled SFA date, was under severe cash flow constraints resulting from delays in construction work, hence delaying its first scheduled MUNIF SFA payment of RM70 million due in October 2002. Delays in construction work were primarily attributed to labour shortage problems. The expiry of the amnesty period for repatriation of illegal foreign workers in July 2002 enforced by the Malaysian Government resulted in the exodus of foreign workers working in various developments under the ECSB Group. Nevertheless, the locked-in sales level from developments secured under the MUNIF issue remains positive and substantial. Additional liquidity buffers are also provided under the issue structure where in the event the aggregate value of sale proceeds should fall below 1.43 times of the outstanding facility, ECSB is obliged to procure the assignment of proceeds from other developments so as to maintain the 1.43 times coverage. Furthermore, upon the full redemption of the BAIDS, ECSB undertakes to assign all remaining proceeds from both projects to the MUNIF’s SFA as additional liquidity buffer.
As at end December 2002, ECSB’s RM250 million BAIDS issue was backed by RM198 million (equivalent to 2.8 times the BAIDS issue, after netting off the balance in the SFA at the same date) of total receivables from secured sales of the Putra Perdana and Ukay Perdana projects; substantially mitigating market risks. Sales performances to date of the said projects have been commendable, reflecting the favourable locations, large residential component of respective developments and competitive pricing of properties.
Secured sales proceeds from five other property developments, namely Bukit Beruntung I, II & III, Sunway Perdana, Kinrara Section 3 and Pulau Melaka, serve as the source of repayment of ECSB’s RM350 million MUNIF. The total receivable from secured sales as at February 2003 amounted to RM463 million (equivalent to 1.43 times the MUNIF issue, after netting off the balance in the SFA). The MUNIFholders’ exposure is hence adequately covered by the secured sales, despite the above average market risks of the respective developments.
ECSB posted a strong growth in pre-tax profit of 45.6% to RM76.4 million during FY2002, driven by a 38% increase in group earnings from sale of properties to RM492.4 million. In FY2002, the group’s debt leverage improved to 1.38 times (after adjusting for credit balances in the SFAs) from 2.18 times previously.