Monday, Mar 05, 2001
Malaysian Rating Corporation Berhad (MARC) has assigned a long-term rating of A-ID (A minus, Islamic debt) to Tranche 1 (RM120 million) of Kuala Lumpur Sentral Sdn Bhd’s (KLSSB) Al-Bai Bithaman Ajil Islamic debt securities facility. Tranches 2A, 2B, 3, 4A and 4B (total RM800 million) of the said facility have been assigned a rating of AID (s) (A, Islamic debt with liquidity support).
The rating of Tranches 2A, 2B, 3, 4A & 4B reflects the credit enhancement provided by Bank Pembangunan & Infrastruktur Malaysia Berhad’s (BPIMB) standby revolving credit facility supporting these tranches and the tight underlying issue structure. Tranche 1’s rating, on the other hand, is based upon the secured property sales backing the debt issue; moderated by the credit and liquidity risks associated with the project and the company’s high debt leverage.
Under a 1997 Concession Agreement, KLSSB was awarded the design and construction of the Kuala Lumpur Central Station complex on railway reserve land formerly known as the ‘Brickfields Yard’. In return, the company was granted the right to commercially develop the balance 62 acres of freehold land (including approximately 2 acres of land to be developed for infrastructure purposes)
The central station serves as a transportation hub; providing terminals for the commuter and inter-city trains, Light Rail Transit system and the airport express rail network. Construction of the station was completed by the appointed contractor, Ekovest-KMZ-Dragages Sdn Bhd in December 2000.
Kuala Lumpur Sentral’s commercial development is divided into four phases. Part of Phase 1, comprising office towers, condominiums and hotels is presently under construction. As at 31 August 2000, an aggregate RM707.6 million of properties have been sold under this phase, of which RM356.9 million remains outstanding. (This includes an outstanding amount of RM120.6 million under an option granted to a purchaser in respect of two parcels of land under lot G). Proceeds from the remaining billings will be credited into a specified sinking fund account and utilized for the redemption of the primary and secondary notes under Tranche 1 of the Islamic debt issue. In the event of a shortfall in the account, the required amount can be drawn from a liquidity buffer, equivalent to one secondary note, maintained in a finance service reserve account.
Phases 2, 3 and 4 comprise the future development of office towers over a 10-year period from 2003 to 2012. Given the large overhang of office space in the Klang Valley, the market risk associated with the development is significant. Sales proceeds from future launches will form the principal source of redemption of the notes issued under Tranches 2A, 2B, 3, 4A and 4B. Liquidity risk under the debt payment structure is mitigated through the establishment of two levels of liquidity protection in the issue structure. The first level is the secondary note liquidity buffer prefunded from the issue proceeds and maintained in a finance service reserve account under each tranche. The second level is BPIMB’s standby revolving credit facility that can be drawndown to cover any shortfall in funding required for the redemption of either secondary or primary notes under the various tranches. The standby revolving credit facility supports an elaborate payment waterfall structured under Tranches 2A, 2B, 3, 4A and 4B, with separate sinking funds and finance service reserve accounts set up under each tranche.
KLSSB’ s debt leverage is high at 2.81 times in FY2000 and is expected to escalate to four times after the issue of the Islamic debts. Fresh equity injections are projected to be made over the tenure of the facility to keep the debt-equity ratio within the covenanted limits. The project cash flow is vulnerable to adverse developments in the property market and thus requires the support of the standby revolving credit line to ensure the full and timely repayment of the Islamic debt securities.
The rating of Tranches 2A, 2B, 3, 4A & 4B reflects the credit enhancement provided by Bank Pembangunan & Infrastruktur Malaysia Berhad’s (BPIMB) standby revolving credit facility supporting these tranches and the tight underlying issue structure. Tranche 1’s rating, on the other hand, is based upon the secured property sales backing the debt issue; moderated by the credit and liquidity risks associated with the project and the company’s high debt leverage.
Under a 1997 Concession Agreement, KLSSB was awarded the design and construction of the Kuala Lumpur Central Station complex on railway reserve land formerly known as the ‘Brickfields Yard’. In return, the company was granted the right to commercially develop the balance 62 acres of freehold land (including approximately 2 acres of land to be developed for infrastructure purposes)
The central station serves as a transportation hub; providing terminals for the commuter and inter-city trains, Light Rail Transit system and the airport express rail network. Construction of the station was completed by the appointed contractor, Ekovest-KMZ-Dragages Sdn Bhd in December 2000.
Kuala Lumpur Sentral’s commercial development is divided into four phases. Part of Phase 1, comprising office towers, condominiums and hotels is presently under construction. As at 31 August 2000, an aggregate RM707.6 million of properties have been sold under this phase, of which RM356.9 million remains outstanding. (This includes an outstanding amount of RM120.6 million under an option granted to a purchaser in respect of two parcels of land under lot G). Proceeds from the remaining billings will be credited into a specified sinking fund account and utilized for the redemption of the primary and secondary notes under Tranche 1 of the Islamic debt issue. In the event of a shortfall in the account, the required amount can be drawn from a liquidity buffer, equivalent to one secondary note, maintained in a finance service reserve account.
Phases 2, 3 and 4 comprise the future development of office towers over a 10-year period from 2003 to 2012. Given the large overhang of office space in the Klang Valley, the market risk associated with the development is significant. Sales proceeds from future launches will form the principal source of redemption of the notes issued under Tranches 2A, 2B, 3, 4A and 4B. Liquidity risk under the debt payment structure is mitigated through the establishment of two levels of liquidity protection in the issue structure. The first level is the secondary note liquidity buffer prefunded from the issue proceeds and maintained in a finance service reserve account under each tranche. The second level is BPIMB’s standby revolving credit facility that can be drawndown to cover any shortfall in funding required for the redemption of either secondary or primary notes under the various tranches. The standby revolving credit facility supports an elaborate payment waterfall structured under Tranches 2A, 2B, 3, 4A and 4B, with separate sinking funds and finance service reserve accounts set up under each tranche.
KLSSB’ s debt leverage is high at 2.81 times in FY2000 and is expected to escalate to four times after the issue of the Islamic debts. Fresh equity injections are projected to be made over the tenure of the facility to keep the debt-equity ratio within the covenanted limits. The project cash flow is vulnerable to adverse developments in the property market and thus requires the support of the standby revolving credit line to ensure the full and timely repayment of the Islamic debt securities.