RAM Ratings reaffirms AA3(bg)/P1(bg) ratings of BBN Development’s Islamic debt facility
The ratings reflect the unconditional and irrevocable guarantee extended by AmInvestment Bank Berhad (AmInvestment), the financial institution ratings of which were reaffirmed by RAM Ratings at AA3/P1 in November 2009. Under this structure, all risks associated with the MMTN/MCP are expected to be absorbed by AmInvestment. The bank guarantee also enhances the credit profile of the debt facility beyond BBND’s inherent or stand-alone credit risk.
BBND is the developer of the Putra Nilai township (formerly known as Bandar Baru Nilai) in Negeri Sembilan. Launched in 1994, Putra Nilai has been maturing slowly over the years; it is now home to several local and international education centres, a growing retail hub and a developing biopharmaceutical centre. These factors have thus far enhanced the township’s vibrancy, and are expected to continue supporting its development prospects. However, these positives are moderated by the Group’s geographical concentration risk, as all of its developments and its remaining undeveloped land bank of some 1,624 acres are located in Putra Nilai, and also the cyclical nature of the property market.
Over the years, BBND has maintained a strong balance sheet; its net gearing ratio has hovered at about 0.2 times over the past 5 years, standing at 0.17 times as at end-September 2009. As at 1 December 2009, total outstanding balances of the MMTN and MCP stood at MYR 25 million ($7.3 million) and MYR 30 million ($8.77 million), respectively. As at the same date, BBND had MYR 12.28 million ($3.59 million) in its designated accounts for the MMTN/MCP facility; this, together with the expected inflow of proceeds from its property and land sales, is expected to support the redemption of the Group’s MYR 25 million ($7.3 million) MMTN, due in December 2010.