Sunway City, the Malaysian property developer with interests in hotel, leisure and health care, has launched the country's first property-related securitization with a M$450 million ($118.4 million) deal.
Deutsche Bank acted as sole bookrunner and lead manager on the transaction, issued out of the ABS Real Estate special purpose vehicle, with Amanah Short Deposits brought in as joint lead manager. Deutsche is currently finalizing the allocation of the bonds to investors and expects to close the transaction next week.
Sunway says that the securitization is part of continuing restructuring efforts to lower its level of gearing and strengthen its financial profile. Although Sunway achieved sales of almost M$600 million in 2001, up 22.4% on the previous year, the company has long term debts of M$558.4 million and total liabilities of M$1.2 billion.
It is thought the deal will lower gearing from 1.3 times to 0.8 times. A clean up of the balance sheet might be expected to lead to an improvement in investor sentiment towards the company's stock, which was trading at M$2.30 in 2000 but more recently has been hovering around the M$0.77 mark.
ABS Real Estate will package together five property assets - including the Sunway Lagoon Resort Hotel and Sunway Hotel Penang buildings - plus the Sunway Lagoon Theme Park's equipment and rights lease as well as preference shares in Sunway Pyramid.
Under the structure of the deal, the assets, estimated to be worth M$892 million, will be purchased by the SPV, which will then issue up to M$450 million of notes to domestic investors. It is believed that under the terms of the deal, Sunway will be able to lease back the properties for a total period of 35 years. However, there has been speculation within Malaysia that the company will look to exercise the option to buy back the properties and fully redeem investors after five years.
The deal has been split into four tranches. Three of these, the class-A M$120 million tranche, rated triple-A by RAM, the class-B M$75 million AA2 rated piece and M$45 million of class-C1 notes, rated A2, have expected average lives of five years and legal maturity of six years.
In addition, there is a M$210 million A2 rated class-C2 three year piece. This will be amortized semi-annually based on projected excess cash arising from lease rental income from Sunway City as well as dividend and redemption payments from the redeemable preference shares.
The triple-A piece offers investors a coupon of 5.25%; the double A notes 5.75%, the C2 tranche 7.875% and the C1 bonds a coupon of 8%.
