MARC has assigned a B- (B minus) rating to Land & General Berhad’s (L&G) redeemable convertible secured loan stocks (RCSLS) of RM320,962,637. The rating reflects the secured nature of the RCSLS and the relatively sustaining demand for L&G’s property development in Bandar Sri Damansara. These factors are offset by the weak composite competitiveness of L&G’s diverse business activities, its uncertain profitability, impaired cash generation ability and the high debt burden resultant from the leveraged expansionary activities over the years.

Emerging from the Asian crisis of 1997/98, L&G’s battered financial profile forced the company to restructure its debt obligations, which includes the issuance of the RCSLS. The company’s debt restructuring scheme involves the settlement of debt owed to the scheme creditors through the exchange of associated company Bumi Armada Berhad (BAB) shares, issuance of RCSLS, rescheduled term loans and new ordinary shares in L&G. Prior to the RCSLS, L&G has invited all eligible scheme creditors to make an offer to swap the debts owed to them with the 47% owned BAB shares held by L&G, thereby reducing the nominal value of RCSLS and new ordinary shares to be issued. The BAB swap played a crucial role in the company’s debt restructuring scheme and has been successfully implemented in September 2002. Proceeds from an asset disposal plan to be executed will provide the funds for interest servicing and redemption of the RCSLS. The asset disposal plan consists mostly of properties and equity interests of the company. Upon full realisation of the plan, L&G intends to focus on property development as its core business.