Fitch Ratings has downgraded the rating on the notes issued by Newland International Properties, Corp. (Newland) and revised the Recovery Estimate (RE) as follows:
--$220 million senior secured notes downgraded to 'Csf' from 'CCsf'; RE to RE70% from RE75%.
Fitch's rating addresses the timely payment of interest on a semiannual basis and ultimate payment of principal at maturity.
The downgrade of the transaction reflects the following: the project's continuous liquidity problems; insufficient funds in the trust accounts, including the non-replenishment of the debt service reserve account (DSRA); and an extended negotiation process with noteholders to work on the restructuring of the notes that has not been concluded.
The RE was revised to RE70% from RE75% reflecting the additional delays on closing units and as a result of the limited project's ability to generate cash. Fitch's Recovery Estimate relates to an estimate of the potential cashflows generated by the underlying asset. It does not reflect the possible outcome of a restructuring of the notes; noteholders may have a different recovery rate.
On Nov. 15, 2011, Newland missed the first scheduled principal payment of $31.4 million. Soon after this, Newland hired Gapstone Group LLC (Gapstone) as its financial advisor. Gapstone has been in discussions with the major noteholders to avoid the acceleration of the notes and to work on a restructuring plan.
On March 20, 2012, Newland obtained consent of the majority noteholders authorizing the company to amend the original indenture (the Second Supplemental Indenture). The main change pertains to the ability of withdrawing funds from the collection account in order to pay construction costs for the completion of the project. The first withdrawal took place on March 30.
Newland is the real estate development company established to develop the Trump Ocean Club International Hotel & Tower (TOC), a multi-use luxury tower located on the Punta Pacifica Peninsula in Panama City, Panama. The TOC building was officially opened to the public on July 6, 2011.
Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Structured
Finance Rating Criteria' (Aug. 4, 2011);
--'Structured Finance
Recovery Estimates for Distressed Securities' (Nov. 16, 2011).
Applicable Criteria and Related Research:
Global Structured Finance
Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=646569
Structured
Finance Recovery Estimates for Distressed Securities
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656557
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