RAM Ratings reaffirms A1(bg) rating of Great Union Properties' debt facility

Published on 06 October 2011
RAM Ratings has reaffirmed the enhanced long-term rating of A1(bg) for Great Union Properties Sdn Bhd’s (GUP or the Company) RM105 million Bank-Guaranteed Serial Bonds (2002/2012) (the Bonds), with a stable outlook. The enhanced rating reflects the unconditional and irrevocable guarantee extended by a consortium of rated financial institutions. The backing of the bank guarantee enhances the credit profile of the Bonds beyond GUP’s stand-alone credit strength; repayment risks associated with the Bonds will be absorbed by the guarantor banks.

GUP is the owner and developer of the 910-room Renaissance Kuala Lumpur Hotel (Renaissance KL or the Hotel), which is strategically located in the heart of Kuala Lumpur. The Company is a 50:49 joint venture between IGB Corporation Berhad (IGB) and Stapleton Development Limited; the latter is a subsidiary of Hong Kong-based conglomerate New World Development Company Limited (NWD). IGB is listed on the Main Market of Bursa Malaysia while NWD is quoted on the Hong Kong Stock Exchange.

Excluding the bank guarantee, GUP’s stand-alone credit strength reflects the strong financial backing from its shareholders, as demonstrated by both parties’ track record of providing advances to aid GUP in meeting its financial obligations. We expect further shareholders’ support to be forthcoming, going forward. On this note, both IGB and NWD have healthy credit positions, underpinned by their sturdy business profiles and financial metrics. Meanwhile, Renaissance KL is an established hotel, with a 15-year track record in the industry. However, the Hotel’s competitive position has weakened in recent years amid stiff competition within the local hospitality sector and its lack of major refurbishment. While some refurbishment had been carried out since 2009, there has not been significant positive impact to date. Similar to its peers, Renaissance KL is also vulnerable to event risks, including health scares, economic upheavals and various other external factors that influence the hospitality and tourism industry.

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