Friday, December 3, 2010

RAM Ratings reaffirms AA1 rating of Mid Valley City's RM200 million debt facility, with ...

KUALA LUMPUR: RAM Ratings has reaffirmed the AA1 rating of Mid Valley City Sdn Bhd's (MVC) RM200 million nominal value Medium-Term Notes Programme (MTN), with a stable outlook.

The reaffirmation is premised on the transaction's structural features, the supporting credit enhancement and healthy performance of the underlying asset - Mid Valley Megamall (Megamall), it said in a statement Friday, Dec 3.

MVC is a wholly owned subsidiary of KrisAssets Holdings Berhad (KrisAssets), which is in turn the property-investment arm of IGB Corporation Berhad ' the ultimate parent company of MVC and Mid Valley Capital Sdn Bhd (MVCap).

MVC is also the owner and operator of Megamall. As such, the primary source of repayment for the MTN stems from the cashflow generated by Megamall.

The rating agency said that in FY Dec 2009, Megamall's pre-tax operating cash flow came up to RM157.86 million (6.8% higher year-on-year) vis-''-vis RAM Ratings' sustainable cash flow assumption of RM116 million.

'The better showing is mainly attributable to Megamall's higher average rental rate (ARR) and broader operating margins.

'We envisage upward potential for Megamall's ARR given the management's continuous efforts to enhance the tenancy mix and property profile of the mall; Megamall's property profile is considered above average, as indicated by RAM Ratings' property score of R-4.40,' it said.

RAM Ratings said under this transaction, the MTN holders would have a first-party, second-ranking charge over Megamall, sharing the same security as the RM400 million Redeemable Secured Bonds (MVCap Bonds) issued by MVCap, and the provider of the Standby Letter of Credit (SBLC) for KrisAssets' RM200 million Bank-Guaranteed Bonds (BG Bonds).

The rights of the MTN holders are subordinated to those of the holders of the MVCap Bonds, but are superior to those of the SBLC provider for the BG Bonds, i.e. DBS Bank Limited (Labuan) ' in terms of both cashflow priority and security ranking, it said.

'With further deleveraging of the MVCap Bonds in September 2010, coupled with the healthy cashflow generated by Megamall, the loan-to-value ratio and debt service coverage ratio for MVC's MTN stood at 30.2% and 2.9 times, respectively.

'RAM Ratings notes that MVC has only issued RM20 million of its RM200 million MTN to date,' it said.

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