Friday, May 23, 2003
MARC has assigned a rating of AAAbg (bank guaranteed) to Mines Golf Resort Berhad’s (MGRB) proposed Bank Guaranteed Serial Bonds (BG Bonds) with nominal value up to RM130 million and a MARC-1bg (bank guaranteed) rating to its proposed Bank Guaranteed Commercial Papers (BG CP) with nominal value up to RM47 million. The rating reflects the unconditional and irrevocable bank guarantee provided by Malayan Banking Berhad (Maybank).
Mines Golf Resort Berhad (MGRB), formerly known as Country Heights Golf Resort Berhad, is principally a property development company, currently developing a project named “The Mines – South Lake” (South Lake Project); a proposed upmarket mixed development predominantly residential and covering 211 acres in the vicinity of Jalan Sungai Besi, to complement the existing Mines Resort City also known as the North Lake. The South Lake Project is expected to exploit the retail and recreational potential of the Resort City.
Proceeds from the BG Bonds and CP will be utilized to refinance MGRB’s term loan facility amounting to RM64.0 million and subscribe for cumulative redeemable preference shares (CRPS) of Country Heights Venture Sdn. Bhd. amounting to RM113.0 million. The South Lake Project has been identified as the source of repayment for the BG Bonds and BG CP.
Given that the properties offered are predominantly bungalow lots and medium to high-end apartments, exposure to market risk would be unavoidable. Nevertheless, the project’s offering of a unique living concept would serve to attract niche buyers. Despite the popularity of Mines Resort City as a tourist destination, South Lake’s commercial projects bear market risk against the backdrop of oversupply in retail spaces and the gloomy outlook of the tourism industry in view of the heightened threat of SARS. Construction risk is also not fully mitigated as the construction of most of the properties has not yet commenced although extensive landscaping and infrastructure works have been completed. This is consistent with MGRB’s policy, “Build the Environment Before Building (BEBB)”, where development of the environment is undertaken before construction of the buildings.
MGRB expects to generate a total net cash inflow of RM189 million (after bonds and interest repayments and taxes) from the South Lake Project during the bond period, i.e. from February 2004 to February 2010. Projected revenue is expected to be driven by sales of residential units and commercial properties as well as dividends and redemption from Country Heights Holding Bhd (CHHB) on the cumulative redeemable preference shares.
Financial flexibility may be limited, as MGRB is restricted from incurring any additional debt, except with prior approval from the Facility Agent, other than undrawn borrowing facilities that are disclosed to the Guarantor. The debt-equity ratio during the bond period, according to MGRB’s projection, will lie within the range of 0.06 times to 2.32 times.
MGRB’s cash flow position, as is typical of most property developers, is fragile. Any rollover of progress billings by more than 15% and reduction in revenue from bungalows and condominiums would weaken the cashflow. Bondholders’ interests nevertheless are secured by the unconditional and irrevocable guarantee provided by Maybank.
Mines Golf Resort Berhad (MGRB), formerly known as Country Heights Golf Resort Berhad, is principally a property development company, currently developing a project named “The Mines – South Lake” (South Lake Project); a proposed upmarket mixed development predominantly residential and covering 211 acres in the vicinity of Jalan Sungai Besi, to complement the existing Mines Resort City also known as the North Lake. The South Lake Project is expected to exploit the retail and recreational potential of the Resort City.
Proceeds from the BG Bonds and CP will be utilized to refinance MGRB’s term loan facility amounting to RM64.0 million and subscribe for cumulative redeemable preference shares (CRPS) of Country Heights Venture Sdn. Bhd. amounting to RM113.0 million. The South Lake Project has been identified as the source of repayment for the BG Bonds and BG CP.
Given that the properties offered are predominantly bungalow lots and medium to high-end apartments, exposure to market risk would be unavoidable. Nevertheless, the project’s offering of a unique living concept would serve to attract niche buyers. Despite the popularity of Mines Resort City as a tourist destination, South Lake’s commercial projects bear market risk against the backdrop of oversupply in retail spaces and the gloomy outlook of the tourism industry in view of the heightened threat of SARS. Construction risk is also not fully mitigated as the construction of most of the properties has not yet commenced although extensive landscaping and infrastructure works have been completed. This is consistent with MGRB’s policy, “Build the Environment Before Building (BEBB)”, where development of the environment is undertaken before construction of the buildings.
MGRB expects to generate a total net cash inflow of RM189 million (after bonds and interest repayments and taxes) from the South Lake Project during the bond period, i.e. from February 2004 to February 2010. Projected revenue is expected to be driven by sales of residential units and commercial properties as well as dividends and redemption from Country Heights Holding Bhd (CHHB) on the cumulative redeemable preference shares.
Financial flexibility may be limited, as MGRB is restricted from incurring any additional debt, except with prior approval from the Facility Agent, other than undrawn borrowing facilities that are disclosed to the Guarantor. The debt-equity ratio during the bond period, according to MGRB’s projection, will lie within the range of 0.06 times to 2.32 times.
MGRB’s cash flow position, as is typical of most property developers, is fragile. Any rollover of progress billings by more than 15% and reduction in revenue from bungalows and condominiums would weaken the cashflow. Bondholders’ interests nevertheless are secured by the unconditional and irrevocable guarantee provided by Maybank.