Published on 22 Nov 2017.
RAM Ratings has reaffirmed the enhanced ratings assigned to Impian Ekspresi Sdn Bhd’s (Impian Ekspresi or the Company) Guaranteed MTN Programmes:
Series | Issue Size (RM million) | Enhanced Rating | Guarantor | Tenure |
MTN (fg) | 300 | AAA(fg)/Stable | Danajamin Nasional Berhad | 10 years |
MTN (bg) | 150 | AAA(bg)/Stable | Malayan Banking Berhad | 7 years |
The enhanced ratings reflect irrevocable and unconditional guarantees from AAA-rated Danajamin Nasional Berhad and Malayan Banking Berhad, which enhance the credit standing of the debt issues beyond Impian Ekspresi’s stand-alone credit strength.
Excluding the guarantees, Impian Ekspresi’s ability to repay borrowings hinges on the success of Pavilion Damansara Heights (the Project), which the Company is developing. Impian Ekspresi’s credit profile is characterised by significant construction and execution risks. Construction progress has been dampened by the complexity of demolition and construction works. In addition, the site’s close proximity to the Mass Rapid Transit line and surrounding roads has necessitated a more cautious and complex construction approach. These have further delayed the expected completion date of the Project to FY Dec 2021 from FY Dec 2020.
Despite the still-fragile property market, the Project’s respective components have received encouraging response. Out of the 6 office towers of the development that are to be sold en bloc, 3 have been taken up. Two of another 3 office towers, which are to be sold on a strata-title basis, have seen 39% of total net floor area taken up, while the remaining tower has been allocated to Johor Corporation. Impian Ekspresi plans to officially launch the residential component of the Project at the end of the year. Two out of 3 towers that are currently at preview stage has received bookings for 82% of units as at end-September 2017. Meanwhile, the Company plans to sign on an anchor tenant for its retail component by the end of the year.
Given that Pavilion Damansara Heights is Impian Ekspresi’s only project, the timely completion and take-up of the Project are imperative to the Company’s ability to service its debt obligations. Impian Ekspresi remains highly leveraged with gearing ratio of 1.67 times as at end-June 2017. The Company’s financial leverage is expected to remain elevated for another year before trending downwards as sales proceeds are used to pare down its debts. Given that the first component is expected to be completed only in FY Dec 2020, after the maturity of the first tranche of the MTN Programme (RM75 million) in November 2019, management has indicated plans to roll over the amount to November 2020. Nevertheless, Tan Sri Desmond Lim Siew Choon, who holds a majority stake in Impian Ekspresi, has extended an irrevocable and unconditional undertaking to the guarantors to ensure the Company has sufficient funds to complete the Project and cover any cost overruns. Tan Sri Lim has also extended an unconditional and irrevocable guarantee on all amounts outstanding under the MTN and syndicated term loans taken on by the Company.
All said, Pavilion Damansara Heights is anticipated to benefit from its prestigious address as well as excellent visibility and accessibility. In addition, the Project is envisaged to benefit from the experienced project team, largely hailing from Malton Group and Pavilion REIT.
Impian Ekspresi is redeveloping the former Damansara Town Centre Complex into Pavilion Damansara Heights. The Project will comprise 9 commercial towers, 3 residential towers and a retail component. The Company’s majority shareholder, Tan Sri Lim, is the Non-Executive Chairman of Malton Berhad and Chairman of Pavilion REIT Management Sdn Bhd.
Analytical contact
Kathleen Por
(603) 7628 1015
kathleen@ram.com.my
Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my
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