MARC has assigned ratings of AAA(bg)/MARC-1(bg) and AA+(bg)/MARC-1(bg) to Legolas Capital Sdn Bhd’s (LCSB) RM105 million nominal value CP/MTNs and RM110 million nominal value CP/MTNs, respectively, based on the irrevocable guarantees provided by Malayan Banking Berhad (Maybank) and United Overseas Bank (Malaysia) Bhd (UOBM) respectively. LCSB is a special purpose vehicle which is an 85.1% owned subsidiary of Ireka Sdn Bhd (ISB), which in turn, is wholly owned by public listed Ireka Corporation Bhd (ICB). The remaining 14.9% in LCSB is owned by MCDF Investment Pte Ltd, a company incorporated in Singapore. On a stand alone basis, ICB is vulnerable to adverse developments due to thin margins from its construction division and high debt levels. However, ICB’s financial profile is expected to improve following the disposal of Ireka Hotels Sdn Bhd (IHSB) and the use of such proceeds to repay borrowings and augment working capital needs.

The AAA(bg)/MARC-1(bg) and AA+(bg)/MARC-1(bg) ratings for the CP/MTNs issue reflect the irrevocable guarantees provided by Maybank and UOBM respectively. Maybank’s financial institutional rating reflects its strong dominant position in the domestic market and sound financial profile, underpinned by improving loan quality and sturdy capitalization. Meanwhile, UOBM’s rating is upheld by the bank’s solid fundamentals; adequate capitalization, improved profit measures and asset quality, with retail deposits predominantly providing a stable source of funding and liquidity. UOBM’s financial flexibility is further enhanced by its parent company, United Overseas Bank Limited in Singapore which in turn is the second largest bank in the republic.

Following the recent disposal of Ireka Hotels Sdn Bhd (IHSB), ICB is now principally involved in construction, property development and e-commerce through its subsidiary companies. The largest contributor to revenue remains its construction and property divisions. As at 31 January 2007, the construction division’s order book stood at RM750.0 million, comprising mainly domestic projects derived from its property development division. ICB’s success in replenishing its construction book order and its ability to produce competitive offerings in terms of development properties are important credit drivers for ICB, going forward.

ICB’s property development activity is currently concentrated in Mont’ Kiara, Kuala Lumpur. As at 31 March 2007, developments in Mont’ Kiara comprised 78% of ICB’s estimated total gross development value of RM1,125.4 million. ICB’s completed development projects include i-Zen @ Kiara II, i-Zen @ Villa Aseana and Phase 1A Luyang Perdana, Kota Kinabalu. ICB’s current property development projects, Tiffani by i-Zen and ONE Mont’ Kiara, both located in Mont’ Kiara are being developed in collaboration with CapitaLand Ltd (Singapore).

On 10 January 2007, ICB’s disposal of its entire shareholding stake in IHSB, owner of The Westin Hotel in Kuala Lumpur, to Newood Assets Limited was completed. The sale was transacted at RM455 million, out of which, RM237 million was used to retire borrowings.

On 5 April 2007, ICB disposed its entire shareholdings in Ireka Land Sdn Bhd and ICSD Ventures Sdn Bhd to Aseana Properties Ltd (APL), an investment holding company listed on the London Stock Exchange (LSE). ICB holds an approximately 20% shareholding interest in APL.

ICB posted lower revenue in FYE2006 year on year, attributed to the lower volume of construction works completed, whilst higher construction costs affected the Group’s profitability. For the three quarters ended 31 December 2006, ICB registered an unaudited loss before tax of RM19.4 million on the back of RM254.3 million revenue, a reflection of the weaker performance of its construction and hotel and leisure divisions. The Group’s debt leverage, rose to 4.0 times in FYE2006 (FY2005: 3.69 times) but is expected to decline in FY2007 following its disposal of IHSB and listing of APL, to a more manageable level of 1.1 times.