Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on April 17, 2020

KUALA LUMPUR: Tropicana Corp Bhd has proposed a RM1.5 billion Islamic medium-term notes programme (sukuk wakalah) to repay borrowings to unencumbered secured properties.

In a filing with Bursa Malaysia, the group said the proceeds will also be used for capital expenditure, investments and working capital. Tropicana said it lodged the programme with the Securities Commission Malaysia yesterday.

Meanwhile, Malaysian Rating Corp Bhd (MARC) has assigned a preliminary rating of “A+” with a stable outlook for the sukuk wakalah. In a statement, MARC said the assigned rating reflected Tropicana’s established market position in property development, steady performance and moderate leverage position. These strengths are supported by a stable albeit modest recurring income from investment properties.

However, the agency said the rating is mainly moderated by Tropicana’s heavy reliance on property and property-related activities, given the prevailing weakness in the domestic property market that will be exacerbated by the economic impact from Covid-19. Meanwhile, the stable outlook incorporates MARC’s expectation that the group will be able to withstand the near-term impact from the virus outbreak based on the group’s strong liquidity position vis-a-vis its financial obligations.

As at end-December 2019, the combined gross development value of Tropicana’s ongoing developments was RM3.8 billion. It has a total unbilled sales of RM836.5 million, providing earnings visibility over the medium term.

“The group has, however, faced slower take-up rates for some property sub-segments such as shop offices and link houses within some of its developments.”

The agency noted Tropicana has a substantial land bank of about 2,167.5 acres (877.16ha) as at end-December 2019, following the acquisitions of 1,121.6 acres of land from related parties for RM1.96 billion that were funded by the issuance of irredeemable convertible preference shares, and novation of borrowings from the related parties. The cash flow from Tropicana’s operations, however, remained healthy at RM176.2 million for 2019.

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