Friday, November 25, 2011

RAM Ratings reaffirms AAA rating of Pasdec's RM150m bonds

KUALA LUMPUR (Nov 25): RAM Rating Services Bhd has reaffirmed the enhanced AAA(s) rating of PASDEC HOLDINGS BHD []'s RM150 million rainbow exchangeable bonds (2006/2013); the long-term rating has a stable outlook.

The rating agency said on Friday the enhanced rating was based on the Pahang government's irrevocable and unconditional put option agreement to the Security Trustee, for the benefit of the bondholders, with approval from the Federal Government. This put option enhances the bonds' credit profile of the REBs beyond Pasdec's inherent or stand-alone credit strength.

RAM Ratings said the bonds were secured by and exchangeable into a pool of option shares (that is IJM Corp Bhd and YTL CEMENT BHD [] shares).

Under the put option, the state is required to purchase the option shares from the security trustee at the option price during the option period, upon the occurrence of a trigger event or event of default.

The option price reflects the aggregate of the nominal amount of the bonds, their redemption premium and coupon payments, and all other outstanding amounts.

The option price is not determined by the market price of the respective shares. Proceeds from the purchase of the option shares will subsequently be used to redeem the bonds.

As at end-October 2011, RM133 million of the bonds had been exchanged for the option shares and the same amount had been cancelled. The outstanding bonds, including the redemption premium, amounted to RM25 million as at the same date.

Pasdec is the main property-development arm of Perbadanan Kemajuan Negeri Pahang (PKNP), which effectively owns 52% of the group.

PKNP is a statutory body established as an economic-development agency under the Pahang State Legislature under Enactment Act 12, 1965.

Notably, Pasdec is one of the largest property developers in Pahang, with a 16-year operating track record. Its main objective is to supply affordable housing in the state, although it has also gradually moved into the development of medium-to-high-end residential and commercial PROPERTIES [].

Meanwhile, Pasdec's recent foray into manufacturing operations in South Africa may heighten its business risk given that it is a new venture in an unfamiliar operating environment.

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