Proposed Issuance of Up To Ringgit Malaysia One Hundred and Seventy Million (RM170,000,000) Nominal Value Bonds ( Proposal ) BACKGROUND INFORMATION 1. ISSUER (i) Name : (formerly known as My Straits Sdn Bhd) (ii) Address : Tingkat 11, Bangunan A, Peremba Square, Saujana Resort, Seksyen U2, 40150 Shah Alam, Selangor Darul Ehsan. (iii) Business Registration No. : 793997-X (iv) Date/Place of incorporation : 1 November 2007 / Kuala Lumpur, Malaysia (v) Date of Listing : Not Applicable (vi) Status : Resident controlled company Bumiputera controlled company (vii) Principal activities : The company s principal activity is to facilitate the proposed issuance of the RM170 million Bonds. (viii) Board of Directors : Che Azlina binti Abdul Aziz Khoi Hoay Ling En. Mohamad Abdul Halim Ahmad (ix) Structure of shareholdings and names of shareholders or, in the case of public company, names of all substantial shareholders (x) Authorised and paid-up share capital : Shareholder Direct Interest Teluk Datai Resorts Sdn Bhd 100% Authorised: Ordinary shares of RM1.00 each Issued and fully paid-up: Ordinary shares of RM1.00 each RM100,000.00 RM2.00 2. Names of parties involved in the proposed transaction (where applicable) i. Principal Adviser/ Lead Arranger/ Lead Manager : HWANGDBS Investment Bank Berhad (Formerly known as Hwang-DBS Investment Bank Berhad) 25.06.08; 23.12.10; 15.07.11 Page 1 of 26
( HwangDBS ) ii. Arranger(s) : Not applicable iii. Valuers : Not applicable iv. Solicitors/Legal Counsel : Albar & Partners v. Financial Adviser : Not applicable vi. Technical Adviser : Not applicable vii. Guarantor : Financial institution(s) as shall be identified and arranged by the Lead Arranger, which shall provide a bank guarantee facility of up to the USD equivalent of RM65,000,000 to guarantee the timely redemption of the Class C Bonds ( Bank Guarantee Facility ). viii. Trustee : Malaysian Trustees Berhad ix. Facility Agent : HwangDBS x. Primary Subscriber(s) and Amount subscribed : The Primary Subscriber(s) will be determined prior to the issuance of the Bonds and the Securities Commission ( SC ) will be informed accordingly. xi. Underwriter(s) and amount underwritten : Not underwritten xii. Central Depository : Bank Negara Malaysia ( BNM ) xiii. Paying Agent : BNM xiv. Reporting Accountant : Not applicable. xv. Others (a) Security Trustee : Malaysian Trustees Berhad (b) Issuing Agent : HwangDBS 3. Facility Description : The Bonds issuance will include the following classes:- i. Class A ( The Class A Bonds ) being Secured Redeemable Bonds of up to RM95,000,000 in nominal value; ii. Class B ( The Class B Bonds ) being Secured Redeemable Bonds of up to RM10,000,000 in nominal value; and, iii. Class C ( the Class C Bonds ) being Bank 25.06.08; 23.12.10; 15.07.11 Page 2 of 26
Guaranteed Secured Redeemable Bonds of up to RM65,000,000 in nominal value. The Class A, Class B and Class C Bonds shall collectively be known as the Bonds 4. Issue size (RM) The Bonds shall be issued in the following series with the respective nominal value:- Class/Series Nominal Value (RM) Class A Series 1 15,000,000 Series 2 20,000,000 Series 3 20,000,000 Series 4 40,000,000 Class B Series 1 10,000,000 Class C Series 1 10,000,000 Series 2 15,000,000 Series 3 15,000,000 Series 4 15,000,000 Series 5 10,000,000 5. Issue price (RM) : To be agreed upon between the Issuer and the Primary Subscriber but expected to be at a discount to the Nominal Value of the Bonds. 6. Tenor of the facility/issue : Unless previously repurchased, redeemed or cancelled, the Bonds shall be redeemed in full at their Nominal Value on the respective Expected Maturity as follows:- Class/Series Class A Series 1 Series 2 Series 3 Series 4 Expected Maturity (Anniversary of the Issuance Date) 7.0 8.0 9.0 10.0 Legal Maturity (Anniversary of the Issuance Date) 9.0 10.0 11.0 12.0 Class B Series 1 Class C Series 1 25.06.08; 23.12.10; 15.07.11 Page 3 of 26 6.0 1.0 8.0 3.0
Series 2 Series 3 Series 4 Series 5 2.0 3.0 4.0 5.0 4.0 5.0 6.0 7.0 Notwithstanding the above, the tenure of the Bonds shall be as per the Legal Maturity of the respective series. Accordingly, the non-redemption of the Bonds on the respective Expected Maturity will not in itself constitute an Event of Default under the Bonds, but a Trigger Event (as defined herein) is deemed to have occurred. The non-redemption of the Bonds on Legal Maturity will be an Event of Default 7. Coupon (%) : The respective Bonds shall carry the following coupons:- Class/Series Coupon (% per annum) Class A Series 1 5.00% Series 2 5.05% Series 3 5.10% Series 4 5.20% Class B Series 1 6.00% Class C Series 1 4.10% Series 2 4.40% Series 3 4.70% Series 4 4.90% Series 5 5.20% Notwithstanding the above, the coupons on Class A Series 2, Series 3 and Series 4 shall be adjusted accordingly in accordance to the Coupon Step Up provision as defined hereinafter. 8. Coupon payment frequency and basis 9. Yield to Maturity ( YTM ) (%) : Semi-annually in arrears. Actual days/365 days : To be determined prior to or at issuance on a when issued basis. 10. Security/Collateral : Class A and Class B Bonds i. a third party first legal charge to be created by Teluk Datai Resorts Sdn Bhd ( Teluk Datai ) over the resort more popularly known as The Datai (the 25.06.08; 23.12.10; 15.07.11 Page 4 of 26
Resorts ) located at Teluk Datai on the island of Langkawi, ranking ahead in point of priority and security over the second legal charge to be created in favour of the Guarantor; ii. such other securities as shall be advised by the Legal Counsel 25.06.08; 23.12.10; 15.07.11 Page 5 of 26 Class C Bonds The Class C Bonds shall be secured against bank guarantee issued pursuant to the Bank Guarantee Facility. Additional Security Notwithstanding the above, the Issuer and Teluk Datai will also create the following security in favor of the Security Trustee acting for and on behalf of the Class A Bondholders and Class B Bondholders and the Guarantor in accordance to the provisions of the Priority and Security Sharing Agreement; which shall provide that the Class A Bondholders shall rank ahead of the interest of the Class B Bondholders and the Guarantor, and the interest of the Class B Bondholders shall rank ahead of the interest of the Guarantor:- i. a first party first ranking fixed and floating charge to be created by the Issuer by way of a debenture over all the present and future assets and undertakings of the Issuer; ii. an irrevocable Power of Attorney to be granted by Teluk Datai for the sale of the Resorts upon the occurrence of a Trigger Event; iii. a first party legal assignment to be created by the Issuer over all its present and future rights, titles, interests and benefits in and under a loan agreement to be entered into between the Issuer and Teluk Datai ( the Loan Agreement ); iv. a first party legal assignment to be created by the Issuer over the DSRA (as defined herein); v. a third party legal assignment to be created by Teluk Datai over all its present and future rights, titles, interests and benefits in the Designated Accounts (as defined herein); vi. a third party first legal assignment to be created by Teluk Datai over all its present and future rights, titles, interests and benefits in and under the management contract ( the Management Contract ) entered into between Teluk Datai and Archipelago Hotels and Resorts Sdn Bhd or such
other company for the management of the Resorts; vii. a third party first legal assignment to be created by Teluk Datai over all its present and future rights, titles, interests and benefits in and under the following insurance policies taken up by itself in relation to the Resorts: a. fire insurance policy; b. consequential loss insurance policy; and c. commercial all risks insurance policy; viii. a third party legal charge to be created by the shareholder(s) over the entire issued and paid-up capital of Issuer; ix. a third party legal charge to be created by Archipelago Hotels (East) Sdn Bhd over one million three hundred and fifty thousand (1,350,000) ordinary shares of Ringgit Malaysia One (RM1.00) each in Teluk Datai; x. a third party legal charge to be created by Pantai Andaman Ventures Sdn Bhd over three million one hundred and fifty thousand (3,150,000) ordinary shares of Ringgit Malaysia One (RM1.00) each in Teluk Datai; and xi. such other securities as shall be advised by the Legal Counsel 11. Details on utilisation of proceeds : Proceeds from the Bonds shall be on-lent by the Issuer to Teluk Datai pursuant to the Loan Agreement. Teluk Datai will then use the proceeds from the loan for the following purposes:- i. up to RM160 million to repay its existing borrowings; ii. to defray all expenses associated to the Bonds issue and the Financing Agreements; and iii to fund the Initial DSRA Amount (as defined under the DSRA provision) 12. Sinking fund : Not applicable. 13. Rating (Final) : Class A Bonds: AAA from RAM Rating Services Berhad ( RAM ). 14. Form and Denomination : Form 25.06.08; 23.12.10; 15.07.11 Page 6 of 26 Class B Bonds: AA2 from RAM. Class C Bonds: AAA(bg) from RAM.
Each Series of the Bonds will be represented by a Global Certificate to be deposited with BNM and shall be issued under the Fully Automated System for Tendering ( FAST ) and Real Time Electronic Transfer of Funds and Securities ( RENTAS ) and will be prescribed in bearer form under the Scriptless Securities Trading System ( SSTS ) maintained by BNM. No Physical delivery of Bonds is permitted. Denomination Each Bond will be in the denomination of RM1,000 15. Mode of Issue : The Bonds shall be issued on a bought-deal basis and shall be subscribed by the Primary Subscriber at the Issue Price 16. Selling Restriction : The Bonds, may not be offered, sold or disposed of, directly or indirectly, nor may any documents or other material in connection therewith be distributed in Malaysia or anywhere else, other than to persons who are within the categories set out in Section 4 (6) of the Companies Act and subject to any law, order, regulation or official directive of either the Securities Commission, BNM or any other regulatory authority from time to time. 17. Listing Status : The Bonds will not be listed on any stock exchanges 18. Minimum Level of Subscription (RM or %) 19. Other Regulatory Approvals Required in relation to the Issue, Offer or Invitation and whether or not obtained : 100% of the size of each issuance. : Not applicable 20. Conditions Precedent : The issuance of the Bonds shall be subject to compliance by the Issuer of conditions precedent including but not limited to: i. The Legal Counsel s review of and satisfaction with:- a the Issuer s certificate of incorporation and memorandum and articles of association; b board resolutions of the Issuer authorizing the issuance of the Bonds and the appointment of authorized signatories to execute the relevant documents thereto; 25.06.08; 23.12.10; 15.07.11 Page 7 of 26
c 25.06.08; 23.12.10; 15.07.11 Page 8 of 26 board resolutions of the Issuer authorizing the extension of the loan to Teluk Datai and the appointment of authorized signatories to execute the relevant documents thereto; ii. Receipt of the valuation report by the Lead Arranger that is prepared by a certified property valuer acceptable to the Lead Arranger confirming that the open market value of the Resorts is no less than RM230 million; iii. Prior approvals of the relevant authorities in Malaysia for the Issuance including but not limited to that of the Securities Commissions shall have been obtained; iv. Confirmation by RAM of a minimum rating of AAA for Class A Bonds, AA2 for Class B Bonds and AAA(bg) for Class C Bonds; v. Board resolutions of Teluk Datai:- a. authorizing the acceptance of the loan from the Issuer and the appointment of the authorized signatories to execute the relevant documents thereto; and, b. authorizing the creation of the securities pursuant to the Loan Agreement and the Financing Agreements (as defined hereinafter) including, but not limited to, the charge over the Resorts and the appointment of the authorized signatories to execute the relevant documents thereto vi. Save and except for the securities which are charged or assigned to the SBLC Provider (as defined hereinafter) as set out in paragraph (x) below, execution of the Financing Agreements in form and substance acceptable to the Lead Arranger; vii. A certificate from Teluk Datai in form and substance acceptable to the Lead Arranger/Trustee/rating agency confirming that there are no material litigation or arbitration proceedings against the Issuer which would likely have a material adverse effect on its ability to perform its obligations under the licenses and agreements to which it is a party; viii. An irrevocable and unconditional undertaking issued by Teluk Datai to pay, for and on behalf of the Issuer, all expenses associated with the Bonds issue and the Financing Agreements including future recurring expenses and to extend to the Issuer such amount as shall be required by the Issuer to fund the DSRA;
ix. Board resolution of Archipelago Hotels (East) Sdn Bhd:- a. authorizing the creation of the charge over its entire shareholding in Teluk Datai and the appointment of the authorized signatories to execute the relevant documents thereto; b. undertaking that the existing loan extended by it to Teluk Datai ( the AHE Shareholders Loan ) amounting to RM43.5 million as at 31 December 2007 will be subordinated to all payments pursuant to the terms and conditions of the Loan Agreement and the Financing Agreements and that it will not force/require Teluk Datai to repay the AHE Shareholders Loan from revenue/cashflow generated from the operations of the Resorts. Notwithstanding the subordination, Teluk Datai is allowed to repay the AHE Shareholders Loan from proceeds derived by it from sources other than the operations of the Resorts; and c. that it will not apply for or join in any proposal of winding up of Teluk Datai and/or the Issuer. 25.06.08; 23.12.10; 15.07.11 Page 9 of 26 x. Receipt of letter of undertaking from the Stand-By Letter of Credit Facility ( SBLC Facility ) Provider ( SBLC Provider ) of Teluk Datai in form and substance acceptable to the Lead Arranger to, amongst others: (1) deliver the duly executed withdrawal form relating to the lienholder s caveat created in favour of the SBLC Provider on the Resorts; (2) deliver the original land title of the Resorts to the Security Trustee; and (3) execute such documents necessary to revoke its security interests over the Operator s Account (as defined under Designated Accounts), the Management Contract and the relevant insurance policies to be assigned to the Security Trustee under the terms of the issuance; upon full repayment of the banking facility granted to Teluk Datai that is secured by the SBLC Facility; xi. The receipt by the Lead Arranger of the duly executed bank guarantee issued by the Guarantor xii. Receipt of legal opinion from the Legal Counsel that the documentation for the Proposal has been
satisfactorily conducted, are legally valid and shall be in full force, binding and enforceable; xiii. Receipt of confirmation letter from the Legal Counsel that all conditions precedent to the issuance have been complied with; and xiv. Any other conditions deemed necessary by the Legal Counsel and/or the Lead Arranger and/or the rating agency 21. Representations and Warranties : By the Issuer Notwithstanding such other representations and warranties as shall be advised by the Legal Counsel, the Issuer represents and warrants that:- i. it is a company duly established and existing under Malaysian law and has the power and authority to enter into the business in which it is engaged; ii. it has the power to enter into, exercise its rights under and perform its obligations under the respective Financing Agreements; iii. all necessary actions, authorizations and consents required under the respective Financing Agreements of the Issuer have been taken, fulfilled and obtained and remain in full force and effect; iv. its entry into, exercise of its rights under and performance of the respective Financing Agreements and the Loan Agreement do not and will not violate any existing law or any agreements to which it is a party; v. the Financing Agreements and the Loan Agreement create valid and binding obligations which are enforceable on and against itself; vi. its audited accounts will be prepared in accordance with approved accounting principles and standards and fairly represent the financial position. 25.06.08; 23.12.10; 15.07.11 Page 10 of 26 By Teluk Datai Notwithstanding such other representations and warranties as shall be advised by the Legal Counsel, Teluk Datai represents and warrants that:- i. it is a company duly established and existing under Malaysian law and has the power and authority to enter into the business in which it is engaged; ii. all approvals, consents, authorizations, licenses require by it to undertake all of its business activities including the owning and the operating
of the Resorts have been obtained, fulfilled and remain valid; 25.06.08; 23.12.10; 15.07.11 Page 11 of 26 iii. it has the power to enter into, exercise its rights under and perform its obligations under the respective Loan Agreement and the Financing Agreements; iv. all necessary actions, authorizations and consents required under the respective Loan Agreement and the Financing Agreements of it have been taken, fulfilled and obtained and remain in full force and effect; v. its entry into, exercise of its rights under and performance of the Loan Agreement and the Financing Agreements do not and will not violate any existing law or any agreements to which it is a party; vi. the Loan Agreement and the Financing Agreements create valid and binding obligations which are enforceable on and against itself; vii. its audited accounts are and will be prepared in accordance with approved accounting principles and standards and fairly represent the financial position. 22. Events of Default : Subject to such other Events of Default as may be advised by the Legal Counsel, an Event of Default shall be deemed to have occurred if:- i. the Issuer fails to redeem the Bonds on their respective Legal Maturity; ii. failure of the Issuer to make any coupon payments under the Bonds when they fall due; iii. the Issuer defaults on any of the provisions of the Financing Agreements (other than failure to redeem the Bonds on their respective Expected Maturity Date) which is not capable of remedy, or which, being capable of remedy, is not remedied within thirty (30) days after notice to the Issuer from the Trustee requesting action from the Issuer to remedy the same; iv. any authorizations, licenses, approvals, permits or consents which is required for the Issuer to carry on its business is withdrawn, revoked or terminated or has expired and not renewed and the result of the foregoing could reasonably be expected to have a material adverse effect on the ability of the Issuer to perform its obligations under the Bonds; v. insolvency or dissolution proceedings is filed against the Issuer;
vi. 25.06.08; 23.12.10; 15.07.11 Page 12 of 26 any representation or warranty made or implied under any provision of the Financing Agreements or any information, notice, opinion or certificate or any other document delivered pursuant to the terms of the Financing Agreements prove to be incorrect or misleading in particular deemed to be material by the Trustee; vii. the Issuer enters into or proposes to enter into, or there is any declaration by any court or authority, a moratorium on the payment of indebtedness or other suspensions of payments generally; viii. a receiver, manager, liquidator, administrator or other similar officer is appointed in respect of the Issuer or in respect of all or any part of the respective assets, properties or undertakings of the Issuer; ix. the Issuer ceases or threaten to cease to carry on all or a substantial part of its business; x. Teluk Datai defaults on any of the provisions of the Loan Agreement (other than payment default) and the Financing Agreements which is not capable of remedy, or which, being capable of remedy, is not remedied within thirty (30) days after notice to Teluk Datai from the Trustee requesting action from Teluk Datai to remedy the same; xi. any authorizations, licenses, approvals, permits or consents which is required for Teluk Datai to carry on its business is withdrawn, revoked or terminated or has expired and not renewed and the result of the foregoing could reasonably be expected to have a material adverse effect on the ability of Teluk Datai to perform its obligations under the Loan Agreement and the Financing Agreements; xii. insolvency or dissolution proceedings is filed against Teluk Datai; xiii. Teluk Datai enters into or proposes to enter into, or there is any declaration by any court or authority, a moratorium on the payment of indebtedness or other suspensions of payments generally; xiv. a receiver, manager, liquidator, administrator or other similar officer is appointed in respect of Teluk Datai or in respect of all or any part of the respective assets, properties or undertakings of Teluk Datai; xv. Teluk Datai ceases or threaten to cease to carry on all or a substantial part of its business; and
xvi. an occurrence of total loss to the Resorts (i.e. due to fire, war or any other disasters); For the avoidance of doubt, the right to declare that an Event of Default has occurred shall be vested with the respective parties as follows:- Class A Bonds holders shall be entitled to declare an Event of Default without having to obtain concurrence from the Class B Bonds holders, Class C Bonds holders or the Guarantor. Class B Bonds holders shall be entitled to declare an Event of Default in the event that Class A Bonds holders agree or there are sufficient funds in the DSRA account to meet all the debt obligations of the Class A Bonds holders. Class B Bonds holders need not obtain concurrence from the Class C Bonds holders or the Guarantor to declare an Event of Default. Class C Bonds holders shall be entitled to declare an Event of Default without the concurrence of the Class A Bonds holders or Class B Bonds holders. Upon the declaration of an Event of Default, the Security Trustee shall act upon the instruction of the relevant Bond holders and/or the Guarantor to enforce the rights accruing to it under the security documents. 23. Principal terms and conditions for warrants : Not applicable 24. Other principal terms and conditions for the issue i. Issue Date : The Bonds shall be issued on a date to be mutually agreed upon between the Issuer and the Lead Arranger but in any case, the Issue Date shall be within six (6) months from the date of the SC s approval. : ii. Repurchase and Cancellation 25.06.08; 23.12.10; 15.07.11 Page 13 of 26 The Issuer may at anytime prior to the Expected Maturity of the respective Bonds, purchase the Bonds from the open market for cancellation. All Bonds purchased and cancelled shall not be available for reissue by the Issuer iii. Call Option : Teluk Datai shall have the right, but not the obligation,
to call on all outstanding Class A Series 2, Series 3 and Series 4 bonds on the 7 th anniversary of the Issue Date at par. For the avoidance of doubt, all Bonds purchased by Teluk Datai pursuant to the Call Option shall remain issued and outstanding until such time as the Bonds shall have been purchased and/or redeemed by the Issuer. iv. Coupon Step Up : On the 7th anniversary of the Issue Date, the coupon of the Class A Bonds Series 2, Series 3 and Series 4 will be adjusted accordingly from the 7th anniversary date thereof till the Legal Maturity of the relevant bonds as follows: Class A Series 2 Series 3 Series 4 Revised Coupon 6.25% p.a. 6.30% p.a. 6.35% p.a. v. Designated Accounts : Teluk Datai shall open and maintain the following accounts (collectively the Designated Accounts ) with a bank acceptable to the Security Trustee:- i. Operator s Account; ii. Revenue Account; iii. Owner s Account; 25.06.08; 23.12.10; 15.07.11 Page 14 of 26 Teluk Datai shall provide the Security Trustee with a detailed one-year operation budget for the Resorts on or before 1 st December of the year prior to the coming year. Operator s Account All monies received by the operator of the Resorts including working capitals shall be deposited into the Operator s Account. The operator shall then be allowed to pay all operating expenses and capital expenses from the balances in the Operator s Account. For the avoidance of doubt, operating expenses shall mean the entire costs and expenses of maintaining, conducting and supervising the operation of the Resorts including the payment of management fees but excluding the followings:- i. all principal and interest of any borrowings of Teluk Datai;
ii. any depreciation and amortization expenses; iii. all taxes payable by Teluk Datai; iv. quit rent and assessment; v. head office administrative and general costs; vi. insurance premiums taken in relation to the Resorts 25.06.08; 23.12.10; 15.07.11 Page 15 of 26 The Resorts operator shall be the sole signatory and operator of this account. Capital expenses shall include expenses incurred for the replacement of capital goods in the Resorts such as furniture, fixtures, furnishing and equipment and shall be limited to 3% of the actual turnover of the Resorts. Revenue Account All monthly closing balance in the Operator s Account less RM500,000 shall be deposited into the Revenue Account. Notwithstanding this, Teluk Datai shall maintain an amount equivalent to all guarantee fee payable under the terms and conditions of the Bank Guarantee Facility for the eighteen (18) months period immediately following the calculation date ( Revenue Account Minimum Required Balance ) which shall be funded in the following manner:- i. an amount equivalent to all guarantee fee payable under the terms and conditions of the Bank Guarantee Facility for the six (6) months period immediately following the Issue Date shall be deposited into the Revenue Account on the Issue Date; and, ii. the balance of the Revenue Account Minimum Required Balance shall then be deposited equally into the Revenue Account over a nine (9) month period commencing from a date falling one month after the Issue Date. The funds standing in the balance of the Revenue Account shall be applied in the following manner:- i. to fund the Owner s Account subject to an amount that is equivalent to the projected income tax payable by Teluk Datai (as per the annual budget submitted) and a further sum of RM2,500,000 per annum; ii. to pay for all recurring fees, costs and expenses associated to the Bonds issue, the Financing Agreements and the Loan Agreement; iii. to meet all its financial obligations under the
terms and conditions of the Loan Agreement including but not limited to funding of the DSRA; iv. to repay all interest due and payable pursuant to the terms and conditions of the Loan Agreement; and, v. to repay all principal due and payable pursuant to the terms and conditions of the Loan Agreement The Revenue Account shall be operated jointly by Teluk Datai and the Security Trustee as joint signatory of the account until the occurrence of a Trigger Event under the Bonds, upon which the Security Trustee shall solely operate the Revenue Account. Owner s Account Funds standing in the balance of the Owner s Account shall be utilized to pay for the following:- i. taxes; ii. assessment and quit rent payable for the Resorts; iii. service tax; iv. insurance premiums; and v. head office administrative and general expenses. Teluk Datai shall be the sole signatory and operator of this account. vi. Debt Service Reserves Account ( DSRA ) : The Issuer shall open and maintain a Debt Service Reserves Account ( the DSRA ) for the purpose of depositing the following:- i. advances from Teluk Datai; ii. all proceeds received by it pursuant to the terms and conditions of the Loan Agreement including but not limited to all interest and principal repayment; iii. all proceeds arriving from the disposal of the Resorts and/or the enforcement of the securities; and, iv. such other proceeds as may be identified from time to time. At all times, the Issuer shall maintain an amount equivalent to all coupons and expected recurring fees payable under the terms and conditions of the Bonds for the eighteen (18) months period immediately following the calculation date ( Minimum Required Balance ). Notwithstanding the Minimum Required Balance and for the avoidance of doubt, the DSRA shall be funded 25.06.08; 23.12.10; 15.07.11 Page 16 of 26
by the Issuer in the following manner:- i. an amount ( Initial DSRA Amount ) equivalent to all coupons payable under the terms and conditions of the Bonds for the six (6) months period immediately following the Issue Date shall be deposited into the DSRA on the Issue Date; and, ii. the balance of the Minimum Required Balance shall then be deposited equally into the DSRA over a nine (9) month period commencing from a date falling one month after the Issue Date. 25.06.08; 23.12.10; 15.07.11 Page 17 of 26 In the event that the balance held in the DSRA is utilized for such purpose as shall be agreed by the Security Trustee, the Issuer shall top up the utilized amount within ten (10) business days after the occurrence of such utilization. Any excess standing in the balance of the DSRA shall be released into the Revenue Account, provided always that no Trigger Event or Event of Default has and/or will occur before and after such release. For the avoidance of doubt, it is agreed that failure of the Issuer to meet its obligations under the DSRA shall not tantamount to an Event of Default but shall tantamount to a Trigger Event. The DSRA shall be operated solely by the Security Trustee and funds standing in the balance of the DSRA shall be utilized by the Security Trustee to meet the obligations of the Issuer upon the occurrence of a Trigger Event and/or on the respective Expected Maturity of the Bonds in the following order of priority: i. Coupon due on the Class A Bonds; ii. Coupon due on the Class B Bonds; iii. Coupon due on the Class C Bonds or interest due on the Bank Guarantee Facility (if funded); iv. Redemption of the Class A Bonds; v. Redemption of the Class B Bonds; vi. Redemption of the Class C Bonds or repayment of the Bank Guarantee Facility (if funded) For the avoidance of doubt, all sales proceeds arising from the disposal of the Resorts upon the occurrence of a Trigger Event may, at the option of the Issuer, the Bonds holders or the Guarantor be utilized to fully redeem the Bonds or to repay any outstanding amount under the Bank Guarantee Facility on the next coupon payment date following the realization of such
proceeds and in payment priority as set out under the DSRA provision. Upon the occurrence of an Event of Default, funds standing in the balance of the DSRA shall be utilized by the Security Trustee to meet the Issuer s obligations in the following order of priority:- i. repayment of all coupon and principal due and payable under the Class A Bonds; ii. repayment of all coupon and principal due and payable under the Class B Bonds; iii. repayment of all coupon and principal due and payable under the Class C Bonds or all interest and principal due and payable under the Bank Guarantee Facility (if funded); Subsequent to the full repayment of the Issuer s obligations under the Bonds or the Bank Guarantee Facility (if funded), any remaining balance in the DSRA shall be transferred to an account to be specified by Teluk Datai. vii. Surplus Cash Disbursement Condition : At any time after the 1 st anniversary of the Issue Date and at the close of each half of the financial year and subsequent to the contribution into the Owner s Account, Teluk Datai may utilize funds standing in the balance of the Revenue Account to pay dividends and/or interests on the existing AHE Shareholders Loan or such other future loans or advances from its shareholder (collectively referred to as Shareholders Loan ) subject always to:- i. Teluk Datai s obligations under the Loan Agreement and the Financing Agreements are met; ii. no Event(s) of Default, potential Event(s) of Default or Trigger Event pursuant to the Loan Agreement and the Financing Agreements has/have occurred or will occur following the said payment; iii. the Debt Service Coverage ratio ( DSCR ) is above 2.50 times following the said payment. For all intents and purposes, the DSCR for this purpose shall be defined as the ratio of:- a. the sum of all balances in the Revenue Account as maintained by Teluk Datai and the DSRA as maintained by the Issuer at the calculation date, the Net Operating Cash Flow of Teluk Datai for the twelve month period immediately following the calculation 25.06.08; 23.12.10; 15.07.11 Page 18 of 26
date; to b. the amounts of total debt service obligations of the issuer pursuant to the terms and conditions of the Bonds for the twelve month period immediately following the calculation date The DSCR shall be calculated by the Issuer (and verified by the Security Trustee) on a semi-annual basis (on every 30 June and 31 December of the calendar year) or prior to any payments (including but not limited to payment of interests on the Shareholders Loan, dividend, etc) to be made by Teluk Datai to its shareholders and/or on such occasion as shall be requested by the Security Trustee. viii. Permitted Investments : Funds held in the Designated Accounts or the DSRA can be utilized to make Permitted Investments unless otherwise directed by the Security Trustee, provided always that such Permitted Investments and such other approved investments (except for money market instruments which can be remitted into the respective Designated Accounts and DSRA on the expected payment date) shall mature and the proceeds be remitted into the respective Designated Accounts and DSRA no later than five (5) business days before any payment obligations become due and payable. Permitted Investments shall mean:- i. securities the interest of which is guaranteed by the Government of Malaysia; ii. fixed income securities issued in Malaysia with the approval of the Government of Malaysia by any authority established under federal or state law; iii. investment in money market instruments where there is the flexibility of early withdrawal without incurring any penalty such as bankers acceptance or promissory notes or certificates of deposit issued by any bank licensed pursuant to the Banking and Financial Institutions Act 1989 and having a minimum long term rating of A3 by RAM or A+ by Malaysian Rating Corporation Berhad ( MARC ) and short term rating of P1 by RAM or MARC-1 by MARC; and iv. other debt or capital market instruments of private entities having a long term rating of at least AA2 by RAM or AA by MARC and short term rating of 25.06.08; 23.12.10; 15.07.11 Page 19 of 26
P1 by RAM or MARC-1 by MARC. ix. Status of the Bonds : The Class A Bonds will constitute direct, unconditional and secured obligations of the Issuer ranking paripassu without any preference or priority among themselves, save and except for those obligations preferred by law. 25.06.08; 23.12.10; 15.07.11 Page 20 of 26 The Class B Bonds will constitute direct, unconditional and secured obligations of the Issuer, subordinated to the Class A Bonds and ranking pari-passu without any preference or priority among themselves, save and except for those obligations preferred by law. The Class C Bonds will constitute direct, unconditional and unsecured obligations of the Issuer, subordinated to the Class A Bonds and the Class B Bonds and ranking pari-passu without any preference or priority among themselves, save and except for those obligations preferred by law. x. Positive Covenants : By the Issuer The Issuer covenants that it shall:- i. comply with all provisions of the Financing Agreements; ii. preserve and keep in full force and effect all consents and rights necessary for the conduct of its business; iii. open and maintain the DSRA and pay all amounts into such account and make all payments from such account, only as permitted under the Financing Agreements; iv. notify the Trustee of claims against itself which would have an adverse effect upon its ability to perform its obligations under the Financing Agreements and that it will defend itself against such claims and will not settle such claims except with the prior consent of the Trustee; v. inform the Trustee of any material change in the directorship, management and substantial shareholders and any other changes that may affect its business condition (financial or otherwise), or operating results; vi. in the event that it is required to make any decision relating to the Loan Agreement, it shall seek the instruction of the Trustee relating to the same and shall convey the instruction of the Trustee to Teluk Datai as if it was its own decision;
vii. provide the Trustee and rating agency the following: a. Half-yearly management accounts within 90 days from the end of each half-year end and year-end audited financial statements within 180 days from its fiscal year end, and such other information (financial or otherwise) as the Trustee and rating agency may reasonably require from time to time; b. Half-yearly report on outstanding Bonds and amounts, outstanding balance in the DSRA within 10 business days after the end of each half financial-year end and financial yearend; c. within one (1) business day of its receipt, any notice (including but not limited to a notice of prepayment) given by Teluk Datai in respect of the Loan Agreement. viii. such other positive covenants that are customary to an issue of similar nature as may be advised by the Legal Counsel 25.06.08; 23.12.10; 15.07.11 Page 21 of 26 By Teluk Datai Teluk Datai covenants that it shall:- i. comply with all provisions of the Loan Agreement and the Financing Agreements; ii. preserve and keep in full force and effect all consents and rights necessary for the conduct of its businesses including but not limited to the operations of the Resorts; iii. enter into and maintain the necessary insurance policies normal for the operations and maintenance of the Resorts and promptly notify the Trustee of any event which will or may give rise to any claim or right of action under the insurances; iv. open and maintain the Designated Accounts and pay all amounts into such account and make all payments from such account, only as permitted under the Loan Agreement and the Financing Agreements; v. provide the Trustee and the rating agency the following: a. half-yearly management accounts within 90 days from the end of each half-year end and year-end audited financial statements within 180 days from its fiscal year end, and such other information (financial or otherwise) as the Trustee and rating agency may reasonably
require from time to time; b. management report within 10 business days from the end of each half financial year setting out, inter-alia, operating performance statistics of the Resorts including but not limited to the average occupancy rate and the average room rate during the computation period, outstanding borrowings pursuant to the Loan Agreement, outstanding balance in the Designated Accounts, DSCR computation (the computation shall only be reported every 6 monthly) vi. undertake a revaluation of the Resorts every 3 years by an independent valuer and an original/certified true copy of the revaluation report is provided to the Trustee and the rating agency vii. ensure that at all times, a. the total amount owed by TDR Golf Resorts Bhd ( TDR Golf ) to its trade creditors shall not exceed 15% of the last audited Revenue of TDR Golf; b. TDR Golf will not incur additional borrowings save and except borrowings incurred in its ordinary course of business and subject always that these borrowings shall not exceed RM200,000 per annum and/or RM2,000,000 on a cumulative basis over the tenure of the Bonds; c. any advances made by any shareholders to TDR Golf shall be subordinated to all of Teluk Datai s obligations under the terms and conditions of the Loan Agreement and/or the Financing Agreements 25.06.08; 23.12.10; 15.07.11 Page 22 of 26 viii. such other positive covenants as may be advised by the Legal Counsel. xi. Negative Covenants : By the Issuer The Issuer, without the prior written consent of the Trustee, shall not do the following including but not limited to:- i. amend its Memorandum or Articles of Association, unless required in compliance with regulatory requirements; ii. enter into any amalgamation, consolidation, merger, reconstruction, dissolution or winding up of itself which may materially affect its ability to perform its obligations pursuant to the Financing Agreements;
iii. other than the loan to Teluk Datai, make or grant any loan or advances or provide or extend any credit or accommodation or give any guarantees, indemnities or similar assurances against financial loss or for the benefit of any other person or act as surety or otherwise voluntarily assume any liability, whether actual or contingent iv. incur, assume or permit to exist any borrowings or other indebtedness other than the Bonds and loans or advances from its shareholder (direct or indirect) which shall be subordinated to its obligations under the Financing Agreements at all times; v. carry on any other activities or undertake any investments, save for the Permitted Investments; vi. save and except for such security interest that is to be created under the Financing Agreements, create or permit to subsist any other security interests other than liens arising in the ordinary course of business and those security interest preferred solely by Malaysian law over its assets; vii. assign its rights or transfer its obligations under the Financing Agreements; viii. open any accounts other than the DSRA; ix. amend any terms and conditions of the Loan Agreement x. such other negative covenants that are customary to an issue of similar nature as may be advised by the Legal Counsel 25.06.08; 23.12.10; 15.07.11 Page 23 of 26 By Teluk Datai Teluk Datai, without the prior written consent of the Trustee, shall not do the following including but not limited to:- i. amend its Memorandum or Articles of Association, unless required in compliance with regulatory requirements; ii. enter into any amalgamation, consolidation, merger, reconstruction, dissolution or winding up of itself which may materially affect its ability to perform its obligations pursuant to the Loan Agreement and the Financing Agreements; iii. other than those previously disclosed to the Lead Arranger, make or grant any loan or advances or provide or extend any credit or accommodation or give any guarantees, indemnities or similar assurances against financial loss or for the benefit of any other person or act as surety or
otherwise voluntarily assume any liability, whether actual or contingent; 25.06.08; 23.12.10; 15.07.11 Page 24 of 26 iv. other than those previously disclosed to the Lead Arranger, incur, assume or permit to exist any borrowings or other indebtedness other than the loan pursuant to the terms and conditions of the Loan Agreement and the Shareholders Loan provided that the Shareholders Loan shall be subordinated to Teluk Datai s obligations under the Loan Agreement and the Financing Agreements at all times save and except where the repayment of the Shareholders Loan is sourced from sources other than the operations of the Resorts; v. other than those previously disclosed to the Lead Arranger and except for investments arising out of the existing lands held by itself, carry on any other activities or undertake any investments, save for the Permitted Investments; vi. other than those previously disclosed to the Lead Arranger or to be created under the Financing Agreements and except for those created in relation to the proposed development of its existing landbank, create or permit to subsist any other security interests other than liens arising in the ordinary course of business and those security interest preferred solely by Malaysian law over its assets; vii. do or suffer to be done any act, matter or thing whereby any insurance may be rendered void, voidable or incapable of being effected, maintained or renewed; viii. assign its rights or transfer its obligations under the Loan Agreement and the Financing Agreements; ix. other than those previously disclosed to the Lead Arranger and except for those opened in relation to the proposed development of its existing landbank, open any accounts other than the Designated Accounts; x. amend any terms and conditions of the xi. Management Contract; such other negative covenants as may be advised by the Legal Counsel xii. Trigger Events : Subject to such other Trigger Events as may be advised by the Legal Counsel, a Trigger Event shall be deemed to have occurred upon the occurrence of the following events:-
i. failure of the Issuer to meet the DSRA requirement; ii. failure of Teluk Datai to meet the DSCR requirement; iii. failure of Teluk Datai to meet the Revenue Account Minimum Required Balance; iv. failure of Teluk Datai to make any payments under the Loan Agreement when they fall due; v. failure of the Issuer to redeem any of the Bonds vi. on their respective Expected Maturity; declaration of an Event of Default under the Class C Bonds; and vii. a notice being served by the Guarantor pursuant to the terms of the Bank Guarantee requesting the Trustee to make a demand under the Bank Guarantee Upon the occurrence of a Trigger Event, the Security Trustee shall have the discretion to proceed with the disposal of the Resorts. The disposal process shall be managed by the Security Trustee, under the rights conferred to the Security Trustee under a Power of Attorney which is to be executed in favor of the Security Trustee to sell the Resorts. The sale proceeds shall be remitted to the DSRA and applied in the order of priority as set out therein. For the avoidance of doubt, all sales proceeds arising from the disposal of the Resorts upon the occurrence of a Trigger Event may, at the option of the Issuer, the Bonds holders or the Guarantor be utilized to fully redeem the Bonds or to repay any outstanding amount under the Bank Guarantee Facility on the next coupon payment date following the realization of such proceeds and in payment priority as set out under the DSRA provision. xiii. Material Adverse Change : The offer/terms and conditions herein may be amended, suspended, delayed or terminated by the Lead Arranger at any time before the Issuance due to reasons including but not limited to the following reasons:- i. any material adverse change in financial position, business activities and credit standing of the Issuer and/or Teluk Datai, ii. any material breach of warranties or undertakings by the Issuer and/or Teluk Datai; and, iii. any changes or prospective changes in national or international monetary, financial, economic or 25.06.08; 23.12.10; 15.07.11 Page 25 of 26
political conditions which are likely to result in material fluctuations or adverse conditions in the Malaysian inter-bank, foreign exchange, stock or capital markets. xiv. Taxes : All payments of principal and interest in respect of the Bonds will be made by the Issuer after deducting or withholding any amount for or on account of any present or future taxes or duties of whatsoever nature imposed or levied by the Government of Malaysia or any authority thereof or therein having power to tax and which are required by law to be deducted or withheld. The Issuer will not pay any additional amount in respect of any such deduction or withholding or payment of principal or interest for or on account of any such taxed and duties. xv. xvi. Legal Fees, Stamp Duty and Other Expenses Financing Agreements / Documentation : All expenses including legal fees, stamp duty, out-ofpocket expenses and other costs incurred in arranging this financing shall be for the account of Teluk Datai. : The Financing Agreements for the Bonds shall include the Trust Deed, Bank Guarantee Facility Agreement, Charge Documents, Assignment Documents, Depository and Paying Agent Agreement, Agency Agreement and other relevant documents to be advised by the Legal Counsel. The Financing Agreements shall be in the form and substance acceptable to the Lead Arranger, Trustee, rating agency, Issuer and the Legal Counsel. xvii. Governing Laws : Laws of Malaysia 25.06.08; 23.12.10; 15.07.11 Page 26 of 26