RAM Ratings reaffirms AAA(bg)/P1(bg) ratings of E&O Property Penang's debt facility

Published on 21 June 2011

RAM Ratings has reaffirmed the enhanced AAA(bg)/P1(bg) ratings of E&O Property (Penang) Sdn Bhd’s (EOPP or the Company) RM350 million Bank-Guaranteed Commercial Papers/Medium-Term Notes Programme (CP/MTN); the long-term rating has a stable outlook. The enhanced long-term rating reflects the unconditional and irrevocable bank guarantee extended by Malayan Banking Berhad (Maybank) (rated AAA/Stable/P1 by RAM Ratings) while the enhanced short-term rating reflects the unconditional and irrevocable bank guarantee extended by Maybank and Affin Bank Berhad (rated A1/Stable/P1 by RAM Ratings). The backing of the bank guarantee enhances the credit profile of the CP/MTN beyond EOPP’s stand-alone credit standing.

EOPP is the developer of Phase 1 of the Seri Tanjung Pinang project (the Project) - a mixed development spanning 240 acres of reclaimed land in Tanjung Tokong, Penang, with a gross development value of approximately RM3.6 billion. EOPP is 95.6%-held by E&O Property Development Berhad, which is in turn a wholly owned subsidiary of Bursa listed Eastern & Oriental Berhad (E&O Berhad or the Group). As at 8 February 2011, EOPP had sold more than RM1.36 billion of properties since its maiden launch in October 2005; about RM332.06 million remained unbilled.

Excluding the bank guarantee, EOPP’s credit fundamentals are supported by its parent’s established track record and strong branding. This, coupled with the Project’s mature status and its strategic location i.e. close proximity to Gurney Drive are expected to augur well for EOPP. As EOPP is an integral part of the Group, we believe it will continue to enjoy strong parental support. These factors are balanced against the Company’s single-project risk and heavy debt load against the backdrop of intense competitive pressures.

Media contact
Jeremy de Silva
(603) 7628 1031
jeremy@ram.com.my