Thursday, Aug 30, 2001
Malaysian Rating Corporation Berhad (MARC) has assigned a short-term rating of MARC-3ID to Pembangunan Brisdale Sdn Bhd’s (PBSB) RM55 million Murabahah Underwritten Notes Issuance Facility (MUNIF). The rating reflects the strength of the issue structure under which secured sales from the West Port Tech Zone housing project have been earmarked for the redemption of the MUNIF. Positive features of the structure include security coverage of 1.45x the total MUNIF outstanding. Additional comfort is derived from the support of its intermediate holding company, Kumpulan Darul Ehsan Bhd (KDEB). These positive factors are however substantially moderated by PBSB’s poor financial performance, weak liquidity position and its exposure to adverse developments in the property market.
Bordered by the developments in Klang and the ports, location of the West Port Tech Zone housing project is considered good. The type of residential development includes terrace houses, townhouses, low and medium cost apartments. With a price range of between RM42,000-RM163,000 per unit for its residential properties, the take-up rate however has been quite slow, with about 20% unsold (as at 31 July 2001), since its first launch in 1996. PBSB has todate secured about RM139.6 million worth of sales with remaining billings of RM70.6 million. The timing of the developments will be dependent on the state of the property market, exposing the company to an element of market risk.
Under the issue structure, the drawdown will be staggered whereby the first drawdown is limited up to a maximum of RM30 million, while the subsequent draw down of RM25 million shall be made available only after receiving two payments of the remaining billings from the end-financiers to the Housing Development Account (HDA)/Project Account.
The refinancing risk arising from the lump sum payment of the facility at its maturity is mitigated by the gradual accumulation of funds in the SFA. By the 18th month, about 49% of the MUNIF would have been backed by funds in the SFA. The minimum balance in the SFA with respect to the 6th,12th, 18th, 24th, 30th and 36th scheduled installment should be made available one month before the due date. In the event there is insufficient funds, KDEB undertakes to provide the remaining balance two weeks before the due date. Liquidity risk is also mitigated, as PBSB shall only be permitted to withdraw from the SFA if the balance in the account fully covers the total notes outstanding or 80% of the excess over the periodic minimum balances provided that the security coverage of the remaining uncollected billings to the MUNIF outstanding is maintained at 1.45x.
Investment risk is considered minimal as monies in the SFA will only be invested in government treasury bills/securities, fixed deposits with financial institutions and private debt securities carrying at least AA- (double minus) ratings or its equivalent.
PBSB’s financial performance was substantially weakened during FY00 when development work was moving at a much slower pace. This was further aggravated by the revision in the viability study of PBSB’s property development plan. Following this, its performance at the pre-tax profit level tumbled by 234.2% into the red territory with a loss of RM3.8 million. Consequently, other profitability measures followed the same trend. Moving forward, revenue for PBSB will be mainly driven by the development plans of its existing land banks, which are currently in the pipeline. The Noteholders position is not expected to be jeopardised as the remaining billings from the West Port Tech Zone project will be assigned to them with a minimum security coverage of 1.45x of outstanding Notes.
PBSB’s debt-equity ratio of 0.49x at end-December 2000 includes a RM 20 million soft term loan provided by its intermediate holding company, KDEB. This soft loan will be subordinated to the MUNIF. The proforma debt-equity ratio is expected to increase to 1.27x, well within the 1.5x cap imposed under the issue structure. Financial flexibility is mainly derived from its intermediate holding company’s support, KDEB, which has portrayed such commitment in the past.
Bordered by the developments in Klang and the ports, location of the West Port Tech Zone housing project is considered good. The type of residential development includes terrace houses, townhouses, low and medium cost apartments. With a price range of between RM42,000-RM163,000 per unit for its residential properties, the take-up rate however has been quite slow, with about 20% unsold (as at 31 July 2001), since its first launch in 1996. PBSB has todate secured about RM139.6 million worth of sales with remaining billings of RM70.6 million. The timing of the developments will be dependent on the state of the property market, exposing the company to an element of market risk.
Under the issue structure, the drawdown will be staggered whereby the first drawdown is limited up to a maximum of RM30 million, while the subsequent draw down of RM25 million shall be made available only after receiving two payments of the remaining billings from the end-financiers to the Housing Development Account (HDA)/Project Account.
The refinancing risk arising from the lump sum payment of the facility at its maturity is mitigated by the gradual accumulation of funds in the SFA. By the 18th month, about 49% of the MUNIF would have been backed by funds in the SFA. The minimum balance in the SFA with respect to the 6th,12th, 18th, 24th, 30th and 36th scheduled installment should be made available one month before the due date. In the event there is insufficient funds, KDEB undertakes to provide the remaining balance two weeks before the due date. Liquidity risk is also mitigated, as PBSB shall only be permitted to withdraw from the SFA if the balance in the account fully covers the total notes outstanding or 80% of the excess over the periodic minimum balances provided that the security coverage of the remaining uncollected billings to the MUNIF outstanding is maintained at 1.45x.
Investment risk is considered minimal as monies in the SFA will only be invested in government treasury bills/securities, fixed deposits with financial institutions and private debt securities carrying at least AA- (double minus) ratings or its equivalent.
PBSB’s financial performance was substantially weakened during FY00 when development work was moving at a much slower pace. This was further aggravated by the revision in the viability study of PBSB’s property development plan. Following this, its performance at the pre-tax profit level tumbled by 234.2% into the red territory with a loss of RM3.8 million. Consequently, other profitability measures followed the same trend. Moving forward, revenue for PBSB will be mainly driven by the development plans of its existing land banks, which are currently in the pipeline. The Noteholders position is not expected to be jeopardised as the remaining billings from the West Port Tech Zone project will be assigned to them with a minimum security coverage of 1.45x of outstanding Notes.
PBSB’s debt-equity ratio of 0.49x at end-December 2000 includes a RM 20 million soft term loan provided by its intermediate holding company, KDEB. This soft loan will be subordinated to the MUNIF. The proforma debt-equity ratio is expected to increase to 1.27x, well within the 1.5x cap imposed under the issue structure. Financial flexibility is mainly derived from its intermediate holding company’s support, KDEB, which has portrayed such commitment in the past.