Thursday, Sep 14, 2000
Malaysian Rating Corporation Berhad (MARC) has assigned a long-term rating of A (single A flat) to Talam Corporation Berhad’s (Talam) RM150 million principal amount of 7-year 5.0% secured serial bonds with 107.6 million detachable warrants.
The rating reflects the strength of the issue structure that is secured by a property development project, the Saujana Puchong Project, which will form the primary source of repayment of the bonds issue. In addition, the specific assignment of the sales proceeds from the project, redemption account and rental income from Talam’s commercial buildings to the trustee afford further protection to bondholders. The rating is, however, moderated by Talam’s tight liquidity position and the group’s exposure to adverse developments in the property market.
Bordered by established developments, the location of Talam’s Saujana Puchong project is considered good. MARC believes market demand to be sustainable given the large residential component of the project development. The type of residential development includes terrace houses, low and medium cost apartments and medium high cost apartments. Nine phases of development have been launched to date; five of which had recorded 100% sales. Aggregate sales reached RM367 million as at 20 August 2000, representing about 36.7% of total gross development value. The timing of the developments will be dependent on the state of the property market, exposing the group to an element of market risk. But given the type and pricing of the developments, such risk would be mitigated.
The serial nature of the bonds with different maturities reduces refinancing risk in the transaction structure. Liquidity risk is also mitigated with the requirement for a liquidity buffer in the redemption account equivalent to 15% of the subsequent year’s instalment, if the actual cashflow meets the projection. With the redemption sum set at 20% of the sales price for each unit sold, the amount of liquidity buffer would rise in the event of an accelerated development of certain phases. This would protect the interests of bond holders particularly in respect of the longer dated bonds. Monies in the redemption account will be invested in government treasury bills/securities and fixed deposits with financial institutions.
The investment income in the redemption account and rental income from Menara Maxisegar and Pandan Kapital will be utilized to meet coupon payments. The rental stream from these commercial buildings would, however, be exposed to the credit risks of tenants and risk of tenancy migration. Any shortfall in the coupon payments will be covered by the cashflow from the Saujana Puchong project.
Talam’s pre-tax profit rose by 36.9% to RM37.1 million as at FYE1/00, despite the slight decline in revenue. The group’s bottomline was boosted by the lower financing costs in that fiscal year; reflective of the low interest rate environment. OPBIT interest coverage consequently improved to 1.8 times from 1.4 times previously. Debt leverage has hovered within a fairly stable range of 0.80 to 0.88 times over the past four years. Proforma debt-equity ratio is expected to reach 0.91 times after the issuance of the bonds. While Talam’s overall liquidity position is tight, the group is noted to have an aggregate of RM768 million in unbilled sales from various development projects as at 20 August 2000. MARC believes that the group’s property development activities will continue to exert a strain on its free cashflow position. The bondholders’ interests are, however, protected under the issue structure, with the source of repayment of the bonds issue to be derived from the sales proceeds of the Saujana Puchong project.
12 September 2000
[This announcement is available on the MARC corporate homepage www.marc.com.my]
This communication is not an offer to sell or a solicitation of any offer to buy the securities mentioned. The information contained herein
is derived from publicly available sources or has been approved for publication by the rated entity and Malaysian Rating Corporation
Berhad makes no representation as to the accuracy or completeness of such information.
© 2000 Malaysian Rating Corporation Berhad
P R E S S A N N O U N C E M E N T
IMMEDIATE RELEASE
MALAYSIAN RATING CORPORATION BERHAD ANNOUNCES NEW RATING FOR TALAM CORPORATION BERHAD’S RM150 MILLION SECURED SERIAL BONDS
Corporate Debt Rating A (single A flat)
Malaysian Rating Corporation Berhad (MARC) has assigned a long-term rating of A (single A flat) to Talam Corporation Berhad’s (Talam) RM150 million principal amount of 7-year 5.0% secured serial bonds with 107.6 million detachable warrants.
The rating reflects the strength of the issue structure that is secured by a property development project, the Saujana Puchong Project, which will form the primary source of repayment of the bonds issue. In addition, the specific assignment of the sales proceeds from the project, redemption account and rental income from Talam’s commercial buildings to the trustee afford further protection to bondholders. The rating is, however, moderated by Talam’s tight liquidity position and the group’s exposure to adverse developments in the property market.
Bordered by established developments, the location of Talam’s Saujana Puchong project is considered good. MARC believes market demand to be sustainable given the large residential component of the project development. The type of residential development includes terrace houses, low and medium cost apartments and medium high cost apartments. Nine phases of development have been launched to date; five of which had recorded 100% sales. Aggregate sales reached RM367 million as at 20 August 2000, representing about 36.7% of total gross development value. The timing of the developments will be dependent on the state of the property market, exposing the group to an element of market risk. But given the type and pricing of the developments, such risk would be mitigated.
The serial nature of the bonds with different maturities reduces refinancing risk in the transaction structure. Liquidity risk is also mitigated with the requirement for a liquidity buffer in the redemption account equivalent to 15% of the subsequent year’s instalment, if the actual cashflow meets the projection. With the redemption sum set at 20% of the sales price for each unit sold, the amount of liquidity buffer would rise in the event of an accelerated development of certain phases. This would protect the interests of bond holders particularly in respect of the longer dated bonds. Monies in the redemption account will be invested in government treasury bills/securities and fixed deposits with financial institutions.
The investment income in the redemption account and rental income from Menara Maxisegar and Pandan Kapital will be utilized to meet coupon payments. The rental stream from these commercial buildings would, however, be exposed to the credit risks of tenants and risk of tenancy migration. Any shortfall in the coupon payments will be covered by the cashflow from the Saujana Puchong project.
Talam’s pre-tax profit rose by 36.9% to RM37.1 million as at FYE1/00, despite the slight decline in revenue. The group’s bottomline was boosted by the lower financing costs in that fiscal year; reflective of the low interest rate environment. OPBIT interest coverage consequently improved to 1.8 times from 1.4 times previously. Debt leverage has hovered within a fairly stable range of 0.80 to 0.88 times over the past four years. Proforma debt-equity ratio is expected to reach 0.91 times after the issuance of the bonds. While Talam’s overall liquidity position is tight, the group is noted to have an aggregate of RM768 million in unbilled sales from various development projects as at 20 August 2000. MARC believes that the group’s property development activities will continue to exert a strain on its free cashflow position. The bondholders’ interests are, however, protected under the issue structure, with the source of repayment of the bonds issue to be derived from the sales proceeds of the Saujana Puchong project.
The rating reflects the strength of the issue structure that is secured by a property development project, the Saujana Puchong Project, which will form the primary source of repayment of the bonds issue. In addition, the specific assignment of the sales proceeds from the project, redemption account and rental income from Talam’s commercial buildings to the trustee afford further protection to bondholders. The rating is, however, moderated by Talam’s tight liquidity position and the group’s exposure to adverse developments in the property market.
Bordered by established developments, the location of Talam’s Saujana Puchong project is considered good. MARC believes market demand to be sustainable given the large residential component of the project development. The type of residential development includes terrace houses, low and medium cost apartments and medium high cost apartments. Nine phases of development have been launched to date; five of which had recorded 100% sales. Aggregate sales reached RM367 million as at 20 August 2000, representing about 36.7% of total gross development value. The timing of the developments will be dependent on the state of the property market, exposing the group to an element of market risk. But given the type and pricing of the developments, such risk would be mitigated.
The serial nature of the bonds with different maturities reduces refinancing risk in the transaction structure. Liquidity risk is also mitigated with the requirement for a liquidity buffer in the redemption account equivalent to 15% of the subsequent year’s instalment, if the actual cashflow meets the projection. With the redemption sum set at 20% of the sales price for each unit sold, the amount of liquidity buffer would rise in the event of an accelerated development of certain phases. This would protect the interests of bond holders particularly in respect of the longer dated bonds. Monies in the redemption account will be invested in government treasury bills/securities and fixed deposits with financial institutions.
The investment income in the redemption account and rental income from Menara Maxisegar and Pandan Kapital will be utilized to meet coupon payments. The rental stream from these commercial buildings would, however, be exposed to the credit risks of tenants and risk of tenancy migration. Any shortfall in the coupon payments will be covered by the cashflow from the Saujana Puchong project.
Talam’s pre-tax profit rose by 36.9% to RM37.1 million as at FYE1/00, despite the slight decline in revenue. The group’s bottomline was boosted by the lower financing costs in that fiscal year; reflective of the low interest rate environment. OPBIT interest coverage consequently improved to 1.8 times from 1.4 times previously. Debt leverage has hovered within a fairly stable range of 0.80 to 0.88 times over the past four years. Proforma debt-equity ratio is expected to reach 0.91 times after the issuance of the bonds. While Talam’s overall liquidity position is tight, the group is noted to have an aggregate of RM768 million in unbilled sales from various development projects as at 20 August 2000. MARC believes that the group’s property development activities will continue to exert a strain on its free cashflow position. The bondholders’ interests are, however, protected under the issue structure, with the source of repayment of the bonds issue to be derived from the sales proceeds of the Saujana Puchong project.
12 September 2000
[This announcement is available on the MARC corporate homepage www.marc.com.my]
This communication is not an offer to sell or a solicitation of any offer to buy the securities mentioned. The information contained herein
is derived from publicly available sources or has been approved for publication by the rated entity and Malaysian Rating Corporation
Berhad makes no representation as to the accuracy or completeness of such information.
© 2000 Malaysian Rating Corporation Berhad
P R E S S A N N O U N C E M E N T
IMMEDIATE RELEASE
MALAYSIAN RATING CORPORATION BERHAD ANNOUNCES NEW RATING FOR TALAM CORPORATION BERHAD’S RM150 MILLION SECURED SERIAL BONDS
Corporate Debt Rating A (single A flat)
Malaysian Rating Corporation Berhad (MARC) has assigned a long-term rating of A (single A flat) to Talam Corporation Berhad’s (Talam) RM150 million principal amount of 7-year 5.0% secured serial bonds with 107.6 million detachable warrants.
The rating reflects the strength of the issue structure that is secured by a property development project, the Saujana Puchong Project, which will form the primary source of repayment of the bonds issue. In addition, the specific assignment of the sales proceeds from the project, redemption account and rental income from Talam’s commercial buildings to the trustee afford further protection to bondholders. The rating is, however, moderated by Talam’s tight liquidity position and the group’s exposure to adverse developments in the property market.
Bordered by established developments, the location of Talam’s Saujana Puchong project is considered good. MARC believes market demand to be sustainable given the large residential component of the project development. The type of residential development includes terrace houses, low and medium cost apartments and medium high cost apartments. Nine phases of development have been launched to date; five of which had recorded 100% sales. Aggregate sales reached RM367 million as at 20 August 2000, representing about 36.7% of total gross development value. The timing of the developments will be dependent on the state of the property market, exposing the group to an element of market risk. But given the type and pricing of the developments, such risk would be mitigated.
The serial nature of the bonds with different maturities reduces refinancing risk in the transaction structure. Liquidity risk is also mitigated with the requirement for a liquidity buffer in the redemption account equivalent to 15% of the subsequent year’s instalment, if the actual cashflow meets the projection. With the redemption sum set at 20% of the sales price for each unit sold, the amount of liquidity buffer would rise in the event of an accelerated development of certain phases. This would protect the interests of bond holders particularly in respect of the longer dated bonds. Monies in the redemption account will be invested in government treasury bills/securities and fixed deposits with financial institutions.
The investment income in the redemption account and rental income from Menara Maxisegar and Pandan Kapital will be utilized to meet coupon payments. The rental stream from these commercial buildings would, however, be exposed to the credit risks of tenants and risk of tenancy migration. Any shortfall in the coupon payments will be covered by the cashflow from the Saujana Puchong project.
Talam’s pre-tax profit rose by 36.9% to RM37.1 million as at FYE1/00, despite the slight decline in revenue. The group’s bottomline was boosted by the lower financing costs in that fiscal year; reflective of the low interest rate environment. OPBIT interest coverage consequently improved to 1.8 times from 1.4 times previously. Debt leverage has hovered within a fairly stable range of 0.80 to 0.88 times over the past four years. Proforma debt-equity ratio is expected to reach 0.91 times after the issuance of the bonds. While Talam’s overall liquidity position is tight, the group is noted to have an aggregate of RM768 million in unbilled sales from various development projects as at 20 August 2000. MARC believes that the group’s property development activities will continue to exert a strain on its free cashflow position. The bondholders’ interests are, however, protected under the issue structure, with the source of repayment of the bonds issue to be derived from the sales proceeds of the Saujana Puchong project.