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Published: Monday July 19, 2010 MYT 3:47:00 PM

MARC assigns AAA rating to LBS sukuk programme


PETALING JAYA: Malaysian Rating Corp Bhd (MARC) has assigned the ratings of MARC-1IS(fg)/AAAIS(fg) to LBS Bina Group Bhd’s RM135mil Islamic Commercial Papers/Islamic Medium Term Notes (ICP/IMTN) Programme.

The ratings carry a stable outlook.

MARC said in a statement today that the assigned ratings and outlook were underpinned by the unconditional and irrevocable Kafalah Guarantee provided by Danajamin Nasional Bhd in relation to the ICP/IMTN Programme.

MARC currently rates Danajamin’s financial strength as AAA/stable on the basis of its important role as Malaysia’s first and sole financial guarantee insurer, its status as a government-sponsored entity, solid capital base, ample liquidity and conservative investment policy.

Proceeds of the programme will be used mainly to finance three development projects and to redeem currently encumbered project land and properties.

Part of the proceeds will also be set aside to pay Danajamin’s guarantee fee for the first year and to pre-fund its first profit payment under the programme.

The designated source of payment for the programme will be property development revenue from the sale of residential properties under three development projects - Puchong Island, the subsequent phases of the Bandar Putera Indah Project in Batu Pahat and Taman Royal Lily in Cameron Highlands.

MARC believes the group will be dependent on its new property launches to provide the impetus for an earnings uptrend.

“Notwithstanding the limited earnings visibility of the group’s yet-to-be-launched development projects and the inherent cyclical nature of its property development operations, noteholders are insulated from the downside risks in relation to LBS’s credit profile by virtue of the guarantee provided by Danajamin.

“Any changes in the supported ratings or rating outlook will be primarily driven by changes in Danajamin’s credit strength,” it said.

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