Thursday, May 03, 2001
Malaysian Rating Corporation Berhad (MARC) has reaffirmed the short term rating of MARC-1 (bg) and the long term rating of AA- (bg) in respect of Johor City Development Sdn Bhd’s (JCD) RM235 million nominal amount of Guaranteed Revolving Underwritten Notes Issuance Facility (GRUNIF) and the RM100 million Guaranteed Serial Fixed Rate Bonds respectively. The reaffirmation of the ratings reflect the unconditional and irrevocable guarantee provided by the respective consortium of bank guarantors, based on the weakest link approach.
JCD, an investment company, is a wholly owned subsidiary of Johor Corporation (JCorp). Previously a dormant company, it has completed the acquisition of three assets in late 1999 from its parent corporation. The assets, all located in Johor, comprise an oil palm plantation situated in Kota Tinggi (Sungai Papan Estate) measuring 3,026 hectares, a commercial complex in Johor Bahru comprising 3-storey retail podium and 22-storey office tower known as KOMTAR and a vacant land in Tampoi measuring 223 acres which has been approved for mixed development known as Taman Intan.
JCD is the issuing vehicle for the private debt securities. Proceeds from the debt issues were used to subscribe for 400 million “B” Redeemable Convertible Cumulative Preference Shares (RCCPS) in Damansara Town Centre Sdn Bhd (DTCSB), a wholly owned subsidiary of Damansara Realty Berhad (DRealty). The funds were in turn on-lent by DTCSB to DRealty for the latter to partially repay its RM540 million loan taken from a statutory body. The issue is part of a larger Proposed Reconstruction and Restructuring Scheme (the Scheme) of DRealty, which is approximately 24.8% owned by JCorp. The Scheme is currently subject to approval by the Securities Commission following the submission made in December 2000.
The palm oil acreage under the Sungai Papan Estate consists entirely of mature trees; 23% of which are past the prime age and will be undergoing replanting process. While the estate’s historical average FFB yields have been satisfactory, MARC expects the production levels and yields to decline in the medium term mainly due to the replanting programme to be carried out over the next few years.
Strategically located within the Johor Bahru Central Business District, the KOMTAR building has, over the years, enjoyed good occupancy and rental rates. The good take-up for office space has been supported by subsidiaries of JCorp and other government-related bodies. MARC views the risk of non-renewal as low given the present tenants’ long relationship with KOMTAR and the current low rental rate. Future rental rates may potentially be lower given the prevailing oversupply situation in both property subsectors in this prime city of the southern state.
The 223-acre leasehold vacant Tampoi land which has been approved for mixed development, is now expected to commence in mid-2001. Its estimated gross development value is RM635 million, comprising mainly medium cost residential and commercial properties.
Debt servicing will be collectively met from dividends on the DTCSB’s “B” RCCPS, income from the Sungai Papan Estate and rental income from the KOMTAR building as well as the potential income to be derived from the development of the Tampoi land. The group expects JCD’s financial flexibility to be enhanced upon the completion of DRealty’s Scheme, which involves, inter alia, rationalization of investments and acquisition of new assets.
MARC will nonetheless continually monitor the impact of these developments on JCD’s financial and debt servicing capacity.
JCD, an investment company, is a wholly owned subsidiary of Johor Corporation (JCorp). Previously a dormant company, it has completed the acquisition of three assets in late 1999 from its parent corporation. The assets, all located in Johor, comprise an oil palm plantation situated in Kota Tinggi (Sungai Papan Estate) measuring 3,026 hectares, a commercial complex in Johor Bahru comprising 3-storey retail podium and 22-storey office tower known as KOMTAR and a vacant land in Tampoi measuring 223 acres which has been approved for mixed development known as Taman Intan.
JCD is the issuing vehicle for the private debt securities. Proceeds from the debt issues were used to subscribe for 400 million “B” Redeemable Convertible Cumulative Preference Shares (RCCPS) in Damansara Town Centre Sdn Bhd (DTCSB), a wholly owned subsidiary of Damansara Realty Berhad (DRealty). The funds were in turn on-lent by DTCSB to DRealty for the latter to partially repay its RM540 million loan taken from a statutory body. The issue is part of a larger Proposed Reconstruction and Restructuring Scheme (the Scheme) of DRealty, which is approximately 24.8% owned by JCorp. The Scheme is currently subject to approval by the Securities Commission following the submission made in December 2000.
The palm oil acreage under the Sungai Papan Estate consists entirely of mature trees; 23% of which are past the prime age and will be undergoing replanting process. While the estate’s historical average FFB yields have been satisfactory, MARC expects the production levels and yields to decline in the medium term mainly due to the replanting programme to be carried out over the next few years.
Strategically located within the Johor Bahru Central Business District, the KOMTAR building has, over the years, enjoyed good occupancy and rental rates. The good take-up for office space has been supported by subsidiaries of JCorp and other government-related bodies. MARC views the risk of non-renewal as low given the present tenants’ long relationship with KOMTAR and the current low rental rate. Future rental rates may potentially be lower given the prevailing oversupply situation in both property subsectors in this prime city of the southern state.
The 223-acre leasehold vacant Tampoi land which has been approved for mixed development, is now expected to commence in mid-2001. Its estimated gross development value is RM635 million, comprising mainly medium cost residential and commercial properties.
Debt servicing will be collectively met from dividends on the DTCSB’s “B” RCCPS, income from the Sungai Papan Estate and rental income from the KOMTAR building as well as the potential income to be derived from the development of the Tampoi land. The group expects JCD’s financial flexibility to be enhanced upon the completion of DRealty’s Scheme, which involves, inter alia, rationalization of investments and acquisition of new assets.
MARC will nonetheless continually monitor the impact of these developments on JCD’s financial and debt servicing capacity.