Sunway City, the Malaysian property developer with interests in hotels, the leisure industry and health care, is to give the Malaysian securitization marker a welcome boost with a M$450 million ($118.4 million) commercial mortgage backed (CMBS) transaction.
Deutsche Bank will act as sole lead manager and bookrunner on the deal, to be launched through the ABS Real Estate special purpose vehicle later this month. The transaction will not only be the first CMBS launched into the still embryonic Malaysian ABS market, but the first property related securitization of any type.
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.
A clean up of the balance sheet might therefore result in 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$1.00 mark.
The CMBS transaction will package together five property assets - including the Sunway Lagoon Resort Hotel and Sunway Hotel Penang buildings - plus the Sunway Lagoon Theme Park's equipment and rights lease as well as preference shares in Sunway Pyramid.
The assets will be purchased by the SPV, which will then issue up to M$ 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 four years.
Sunway City has also announced that it will issue M$250 million from a commercial paper and medium term note programme, which it will use to repay existing debt and for working capital. Deutsche Bank was again mandated to arrange the offering.
