RAM Ratings reaffirms Mid Valley Capital's bonds AAA rating

by **hlk** Wed 28 Dec 2011, 20:26

KUALA LUMPUR (Dec 28): RAM Rating Services Bhd has reaffirmed the AAA
rating of Mid Valley Capital Sdn Bhd's (MVCap) bonds with a stable
outlook.

The debt notes are the class 1 series C to F redeemable
secured bonds. RAM Ratings said MVCap, a unit of KRISASSETS HOLDINGS
BHD [], was set up as the funding vehicle for the Al-Bai Bithaman Ajil
financing transaction between MVCap and Mid Valley City Sdn Bhd (MVC).

The bonds' primary source of repayment would be from the cashflow
generated by Mid Valley Megamall (Megamall), which is owned and operated
by MVC.

On Sept 9, 2011, MVCap had obtained the bondholders'
approval to extend the expected maturity date and legal maturity dates
of the bonds for another five years from its seventh anniversary, which
was Sept 15, 2011.

'RAM Ratings highlights that the extension
has no impact on the rating of the bonds as we do not perceive this as a
distressed scenario.

'The rating reaffirmation is premised on
Megamall's healthier pre-tax operating cashflow of RM174.71 million in
FY December 2010 (+10.7%), compared to our sustainable-cashflow
assumption of RM116 million,' it said.

RAM Ratings said the
better-than-expected showing was mainly due to Megamall's stronger
average rental rate (ARR), almost-full average occupancy rate (AOR) and
healthier operating margins.

'Moving forward, we envisage the
Mall's ARR to continue trending upwards, premised on its locked-in
tenancies and strong appeal to retailers,' it said.

During the
reviewed period, Megamall's RAM Property Score was revised from R-4.40
to R-4.75, which corresponded to a capitalisation rate of 8.50%.

The rating agency explained the revision was based on Megamall's
consistently strong tenancy mix, as reflected in its strong ARRs and
AORs.

The resultant higher adjusted valuation of RM1.37 billion
for the Mall and the further deleveraging of the transaction had led to a
higher loan-to-value ratio of 14.66% and stronger debt service coverage
ratio of 5.80 times, which remained commensurate with the AAA rating of
the bonds.