MARC has downgraded the long-term ratings of Ambang Sentosa Sdn. Bhd.’s (ASSB) RM272 million and RM226 million of class B and class C Al-Bai Bithaman Ajil Islamic debt (BaIDS) facility from BBB+ID to CID and from BBBID to CID respectively.  The downgrades are based upon the insufficient funds in the designated accounts to meet the primary Class B BaIDs which falls due on 28th July 2006 brought about by prolonged construction delays experienced at the Taman Puncak Jalil development resulting in significantly lower progress receipts compared to projections; and the high degree of uncertainty on ASSB’s ability to refinance the existing BaIDS prior to the scheduled maturity date of Class B BaIDS, both of which may lead to an event of default under the Class B and C BaIDS. 

ASSB is a special purpose company incorporated in Malaysia for the purpose of purchasing from the originator, Maxisegar Sdn. Bhd. (MSB), the latter’s rights, title and interest in the balance of receivables under a selected pool of Sale and Purchase Agreements (SPAs) entered into between the originator and end-purchasers.  The SPAs are in respect of the sale of residential and commercial units developed by MSB in Taman Puncak Jalil and Saujana Damansara.  Purchase of receivables was funded via the issuance of the BaIDS by ASSB. 

As at 30th April 2006, balances in the BaIDS Redemption Account, Escrow Account 2 and Escrow Account 3 amounted to RM2.6 million, RM17.3 million and RM0.5 million respectively.  With total balances amounting to RM20.4 million from these three designated accounts, the shortfall was equivalent to RM477.6 million when compared to total outstanding BaIDS of RM498.0 million (primary portion only).  After taking into account the RM40.8 million in Escrow Account 1 earmarked to fund the construction of the assigned phases of Taman Puncak Jalil, the total shortfall amounts to RM436.8 million. 

During the period under review from February 2006 to May 2006, MARC was made to understand by MSB that ASSB intends to refinance the BaIDS via issuance of private debt securities or restructure the BaIDS via issuance of equity-linked instruments.  MARC was subsequently made to understand that the proposals put forward were rejected by the bondholders and that MSB or Talam (on behalf of MSB) has yet to put forward another proposal for the bondholders’ consideration.

The unfavourable developments in the construction and property development industries have indeed affected the Taman Puncak Jalil development with construction falling behind schedule by more than twelve months.  The Saujana Damansara development was not affected as the development was fully completed by 30th  April 2005.  As at 31 January 2006, the overall status of completion for Taman Puncak Jalil is 60.7% representing a mere 1.9% progress from 30th April 2005.