RAM Ratings reaffirms AAA(fg) rating of BerjayaCity's MTN programme

Published on 17 August 2011
RAM Ratings has reaffirmed the enhanced rating of BerjayaCity Sdn Bhd’s (BCity or the Company) RM150 million Danajamin-Guaranteed Medium Term Notes Programme (MTN) at AAA(fg) with a stable outlook. The enhanced rating reflects the irrevocable and unconditional financial guarantee by AAA/P1-rated Danajamin Nasional Berhad (Danajamin). The backing of the financial guarantee enhances the credit profile of the MTN beyond BCity’s stand-alone credit risk. Under this structure, all risks associated with the MTN are expected to be absorbed by Danajamin.



BCity is primarily involved in oil-palm plantations. The Company’s ultimate parent is Berjaya Corporation Berhad (BCorp), a conglomerate with interests in a vast array of businesses.

BCity is a small player within the oil-palm plantation industry, with a planted area of 4,929 hectares (ha) as at end-April 2011. The Company has a track record of healthy fresh fruit bunches yields of above 20 metric tonnes per mature ha, slightly higher than the industry average. However, its production costs are high compared to rated peers due to higher harvesting and labour costs arising from its estates’ hilly terrains as well as its large proportion of older and taller palms.
As at end-FY Apr 2011, BCity remained highly leveraged with a gearing ratio of 1.76 times. Its funds from operations debt coverage ratio, however, improved to 0.11 times arising from favourable crude palm oil prices during the review period (end-FY Apr 2010: 0.05 times). Over the next 3 years, the Company’s balance sheet metrics are envisaged to be weak, with projected gearing levels of about 1.6 times and projected operating cashflow debt coverage of between 0.04 times to 0.10 times.

Nonetheless, BCity derives financial flexibility from the support of its ultimate parent, BCorp, which has previously extended financial backing to the Company and has also provided a corporate guarantee to Danajamin on the MTN. As at end-April 2011, advances from BCorp to BCity summed up to RM178 million.

Media contact
Anne Yap
(603) 7628 1038
anne@ram.com.my