Press Release
JCR-VIS Assigns Real Estate Developer Grading and Proposed Sukuk Rating to Eden Housing Limited
Karachi, November 16, 2007: JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has assigned preliminary medium to long term rating of A (Single A) to the proposed sukuks of Rs. 2 billion (with additional green shoe option of Rs. 1 billion) of Eden Housing Limited (EHL) with ‘Stable’ outlook. In addition, JCR-VIS is assigning Real Estate Developer Grading of PE-1 – (PE One Minus) to the company. The preliminary sukuk rating will be converted into final rating on review of the signed legal documents incorporating the structure of the transaction.
The assigned ratings take into account the group’s success in building the brand name of ‘Eden’ for itself as a real estate developer, which is unique in the local industry, carrying with it a history of successful projects largely targeted towards the housing sector. Preservation of the brand equity going forward, now that the group operations are being run under three different companies all using the Eden slogan, will be a core concern. EHL’s own operations are run on corporate lines with professionals employed in all critical functions of the business. Extensive Management Information Systems are in place with capabilities of project planning, project monitoring as well as tracking of collections against receivables. Since relatively low proportion of the project work is outsourced to third parties, the company maintains direct control on quality, time and cost budgets which also results in higher profit margins.
While the real estate industry is globally cyclical, we are of the opinion that the company’s current emphasis on affordable housing sector is relatively resilient to economic shocks comparative to the higher end of the market. The sponsors’ past support to the company and commitment to inject further funds is a source of comfort. The proceeds of the sukuks being rated will be utilized to buy land for development of housing projects. Since the cashflows from the currently ongoing projects will extinguish before the maturity of the proposed sukuks, the status of new project launches will be closely monitored by JCR-VIS.
The proposed sukuks will be issued for a term of five years inclusive of one year grace period on principal repayment which will subsequently be redeemed in eight equal semi annual tranches with prepayment allowed after two years from issue date. The markup rate is proposed to be six months KIBOR plus 250 bps semi annually in arrears with floor of 7% and cap of 20%. Further, the sukuk ratings take into account the proposed comforts in the structure of the transaction.
For further information on this rating announcement, please contact Mr. Safdar Kazi (safdar@jcrvis.com.pk) or Ms. Sadaf Aliuddin (sadaf@jcrvis.com.pk) at 5311861 (10 lines) or fax to 5311873.
Faheem Ahmad
President & CEO