Monday, Aug 06, 2001
Corporate Debt Ratings:
(i) Proposed Issue of Up to RM150 Million Nominal Value of Redeemable
Secured Bonds With up to 142.1 Million Warrants (2001/2008) – Tranche 1 A-
(ii) Proposed Issue of Up to RM150 Million Nominal Value of Redeemable
Secured Bonds With up to 142.1 Million Warrants (2001/2008) – Tranche 2 A-
Malaysian Rating Corporation Berhad (MARC) has assigned long-term ratings of A- (single A minus) to MK Land Holdings Berhad’s (MK Land) proposed issue of up to RM300 million nominal value of redeemable secured bonds to be issued in two tranches. The ratings reflect the strength of the underlying issue structure, in which, secured sales from specific property development projects have been earmarked for the redemption of the bond issues. Positive features of the issue structure include security coverage of 1.43 times the total bonds outstanding, maintenance of minimum balances in a sinking fund account (SFA) and a six-month debt service liquidity buffer. The ratings, are however, moderated by vulnerability of the projects to adverse developments in the local property market.
Prior to a reverse take-over exercise, MK Land was principally involved in the manufacturing of biscuits, wholesale and distribution of foodstuff (under the name of Perfect Food Industries) and property dealings and development. Currently the principal activities of the Group are property development, hotel and resort operations and provision of property maintenance services.
The bond issues will be backed by RM429 million of secured (locked-in) sales (equivalent to 1.43 times security coverage) from properties sold from the Damansara Damai (DDamai) and Damansara Perdana (DPerdana) projects. This provides adequate security coverage to bondholders, substantially minimising market risk. In addition, market demand is expected to be sustainable given the large affordable residential component of the respective development.
Sales performance achieved as at 28 February 2001 has been quite impressive with average take-up rates of 71% and 83% of total gross development value (GDV) launched for DDamai and DPerdana projects respectively. The amount billed for the respective project as at the same date stood at RM344.8 million and RM223.7 million whilst the remaining billings stood at RM368.1 million and RM140.1 million respectively. Sales from the DDamai project will be used to top-up any deficiency in security coverage for Tranche 2 in the event sales from the DPerdana project is insufficient, and vice versa.
The credit risk is not concentrated as it is spread over a large number of purchasers; most of its house buyers have secured end-financing facilities from financial institutions/the Government. The long established track record of MK Land Group in developing various townships reduces the construction risk of the developments.
The investment risk is also mitigated, as funds in the SFA will only be invested in government treasury bills/securities, fixed deposits with licensed financial institutions and private debt securities carrying at least AA- (double A minus) ratings or its equivalent. Refinancing risk is mitigated with the requirement for a gradual accumulation of funds in the SFA.
MK Land’s financial performance improved significantly from a pre-tax loss of RM2.8 million in FY99 to a pre-tax profit of RM35.1 million in FY00. This was mainly due to the higher turnover resulting from the change in the company’s main activity. Profit for the 11 months period ended 31 December 2000 increased further to RM62.5 million. Property development activity continued to be the major contributor, a trend which is expected to continue in the near to medium term.
In terms of its leverage profile, the Group’s debt-equity ratio remains stable at 0.91 times for the last two accounting periods. The proforma debt-equity ratio is expected to increase to 1.13 times after issuance of the Tranche 1 bonds and 1.67 times after issuance of Tranche 2 bonds. The Group’s debt leverage is capped at 2.50 times under the issue structure.
(i) Proposed Issue of Up to RM150 Million Nominal Value of Redeemable
Secured Bonds With up to 142.1 Million Warrants (2001/2008) – Tranche 1 A-
(ii) Proposed Issue of Up to RM150 Million Nominal Value of Redeemable
Secured Bonds With up to 142.1 Million Warrants (2001/2008) – Tranche 2 A-
Malaysian Rating Corporation Berhad (MARC) has assigned long-term ratings of A- (single A minus) to MK Land Holdings Berhad’s (MK Land) proposed issue of up to RM300 million nominal value of redeemable secured bonds to be issued in two tranches. The ratings reflect the strength of the underlying issue structure, in which, secured sales from specific property development projects have been earmarked for the redemption of the bond issues. Positive features of the issue structure include security coverage of 1.43 times the total bonds outstanding, maintenance of minimum balances in a sinking fund account (SFA) and a six-month debt service liquidity buffer. The ratings, are however, moderated by vulnerability of the projects to adverse developments in the local property market.
Prior to a reverse take-over exercise, MK Land was principally involved in the manufacturing of biscuits, wholesale and distribution of foodstuff (under the name of Perfect Food Industries) and property dealings and development. Currently the principal activities of the Group are property development, hotel and resort operations and provision of property maintenance services.
The bond issues will be backed by RM429 million of secured (locked-in) sales (equivalent to 1.43 times security coverage) from properties sold from the Damansara Damai (DDamai) and Damansara Perdana (DPerdana) projects. This provides adequate security coverage to bondholders, substantially minimising market risk. In addition, market demand is expected to be sustainable given the large affordable residential component of the respective development.
Sales performance achieved as at 28 February 2001 has been quite impressive with average take-up rates of 71% and 83% of total gross development value (GDV) launched for DDamai and DPerdana projects respectively. The amount billed for the respective project as at the same date stood at RM344.8 million and RM223.7 million whilst the remaining billings stood at RM368.1 million and RM140.1 million respectively. Sales from the DDamai project will be used to top-up any deficiency in security coverage for Tranche 2 in the event sales from the DPerdana project is insufficient, and vice versa.
The credit risk is not concentrated as it is spread over a large number of purchasers; most of its house buyers have secured end-financing facilities from financial institutions/the Government. The long established track record of MK Land Group in developing various townships reduces the construction risk of the developments.
The investment risk is also mitigated, as funds in the SFA will only be invested in government treasury bills/securities, fixed deposits with licensed financial institutions and private debt securities carrying at least AA- (double A minus) ratings or its equivalent. Refinancing risk is mitigated with the requirement for a gradual accumulation of funds in the SFA.
MK Land’s financial performance improved significantly from a pre-tax loss of RM2.8 million in FY99 to a pre-tax profit of RM35.1 million in FY00. This was mainly due to the higher turnover resulting from the change in the company’s main activity. Profit for the 11 months period ended 31 December 2000 increased further to RM62.5 million. Property development activity continued to be the major contributor, a trend which is expected to continue in the near to medium term.
In terms of its leverage profile, the Group’s debt-equity ratio remains stable at 0.91 times for the last two accounting periods. The proforma debt-equity ratio is expected to increase to 1.13 times after issuance of the Tranche 1 bonds and 1.67 times after issuance of Tranche 2 bonds. The Group’s debt leverage is capped at 2.50 times under the issue structure.