Tuesday, Jan 18, 2000
Malaysian Rating Corporation Berhad (MARC) has assigned a short-term rating of MARC-1 (bg) and AA- (bg) (double A minus) to Johor City Development Sdn Bhd’s Guaranteed Revolving Underwritten Notes Issuance Facility (GRUNIF) of up to RM235 million (nominal amount) and RM100 million Guaranteed Serial Fixed Rate Bonds respectively. The ratings reflect the strength of the unconditional and irrevocable guarantees provided by the respective consortium of bank guarantors, based on the weakest link approach.
Johor City Development Sdn Bhd (JCD), an investment company, is a wholly owned subsidiary of Johor Corporation (JCorp). Previously a dormant company, JCD has recently completed the acquisition of three assets from its parent company. The assets, all located in the state of Johor, comprise an oil palm plantation (Sungai Papan Estate) measuring slightly over 3,000 hectares, a commercial office complex (KOMTAR building) and vacant 250-acre leasehold land approved for mixed development in Tampoi.
JCD is used as the issuing vehicle for the private debt securities. The issue is part of a larger Reconstruction and Restructuring Scheme for Damansara Realty Berhad (DRealty), which is 24.8% owned by JCorp. Proceeds of the debt issues will be used to subscribe for preference shares in Damansara Town Centre Sdn Bhd (DTCSB), a wholly owned subsidiary of DRealty. The funds are in turn on-lent by DTCSB to DRealty for the latter to partially repay its RM540 million loan taken from a statutory body.
The palm oil acreage under the Sungai Papan Estate consists entirely of mature trees; 23% of which are past the prime age and are due for replanting. While the estate’s historical average yields have been satisfactory, MARC expects the production levels and yields to decline in the medium term mainly due to the planned replanting of part of the acreage.
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 is somewhat 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. Future rental rates may however be lower given the prevailing market conditions in both property subsectors.
JCD’s proforma debt leverage, after accounting for its debt issues, will be 0.72 times. Sources of debt servicing is expected to come from dividends on the DTCSB preference shares and income from the Sungai Papan Estate and KOMTAR building. The group expects JCD’s financial flexibility to be enhanced upon the completion of the Reconstruction and Restructuring Scheme of DRealty, which involves, inter alia, rationalization of investments and acquisition of new assets.
MARC will continually monitor the impact of these developments on JCD’s financial and debt servicing capacity.
Johor City Development Sdn Bhd (JCD), an investment company, is a wholly owned subsidiary of Johor Corporation (JCorp). Previously a dormant company, JCD has recently completed the acquisition of three assets from its parent company. The assets, all located in the state of Johor, comprise an oil palm plantation (Sungai Papan Estate) measuring slightly over 3,000 hectares, a commercial office complex (KOMTAR building) and vacant 250-acre leasehold land approved for mixed development in Tampoi.
JCD is used as the issuing vehicle for the private debt securities. The issue is part of a larger Reconstruction and Restructuring Scheme for Damansara Realty Berhad (DRealty), which is 24.8% owned by JCorp. Proceeds of the debt issues will be used to subscribe for preference shares in Damansara Town Centre Sdn Bhd (DTCSB), a wholly owned subsidiary of DRealty. The funds are in turn on-lent by DTCSB to DRealty for the latter to partially repay its RM540 million loan taken from a statutory body.
The palm oil acreage under the Sungai Papan Estate consists entirely of mature trees; 23% of which are past the prime age and are due for replanting. While the estate’s historical average yields have been satisfactory, MARC expects the production levels and yields to decline in the medium term mainly due to the planned replanting of part of the acreage.
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 is somewhat 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. Future rental rates may however be lower given the prevailing market conditions in both property subsectors.
JCD’s proforma debt leverage, after accounting for its debt issues, will be 0.72 times. Sources of debt servicing is expected to come from dividends on the DTCSB preference shares and income from the Sungai Papan Estate and KOMTAR building. The group expects JCD’s financial flexibility to be enhanced upon the completion of the Reconstruction and Restructuring Scheme of DRealty, which involves, inter alia, rationalization of investments and acquisition of new assets.
MARC will continually monitor the impact of these developments on JCD’s financial and debt servicing capacity.