Trump Ocean Club's Ratings Downgraded

Fitch Downgrades Newland Int'l Prop, Corp.'S S220mm SR Secured Notes; Remains On Negative Watch

Thursday, March 17, 2011

Fitch Ratings-Chicago-18 February 2011: Fitch Ratings has downgraded Newland International Properties, Corp.'s $220 million senior secured notes to 'Bsf' from 'B+sf'. The transaction remains on Rating Watch Negative due to continuing concerns over further delivery delays as well as to monitor buyers' willingness and ability to close on units upon delivery. Newland International Properties, Corp. (Newland) is developing Ihe Trump Ocean Club International Hotel & Tower (TOC). a multi-use lower located on the Punta Pacifica Peninsula in Panama City, Panama.

The downgrade of Ihe transaction is attributed to Ihe on-going construction and delivery delays as well as Ihe reduction in eligible receivables to $229 million as of year-end 2010 from $253.7 million as of October 2010. Unit delivery has been further delayed and this may cause pressure in replenishing the debt service reserve account if used during Ihe May debt payment. Additionally, this shrinking lime cushion will give Newland less time to attempt to re-sell any additional units that default during this time period.

In December, upon the failure of the casino buyer to make an additional payment due, Newland declared the casino buyer in default. The casino default in combination with the previously recognized July unit defaults have resulted in an approximate decrease of nearly $32 million in eligible receivables, making the project more sensitive to future buyer defaults and dependent upon new unit sales to repay the notes.

While delays at the project have been on-going, largely related to the delivery and installation of the interior millwork for the units, progress is now being made at the site. As of mid-February the millwork for the condominium units up to the 35th floor has been substantially completed, the hotel room work is now approximately 25% completed, and the baylofts completion is progressing. The unit delivery process is projected to be completed in phases over the next few months, with commercial spaces and condominium units beginning in March and the baylofts and hotel units starling in April.

The ability of buyers to obtain mortgage financing, if needed, continues to be a concern that Filch is being monitored closely. Since buyers do not need to show proof of their ability lo pay until Ihe certificate of occupancy is presented, it is difficult to track Ihe potential for unit defaults upon delivery. However, given that the project is now in the final stages of construction. Fitch expects this to become more apparent over the next few months as units become ready for delivery.

There are sufficient funds in the debt service reserve account to make the May 2011 debt service payment. However, if the actual delivery dates continue to be pushed out or the actual level of defaults is greater than expected, it will be more difficult for Newland to replenish the account within 60 days of the May payment, as currently required under the documents, or meet the November debt service payment of $45 million.

More on this topic

Further Complications for Trump Tower

December 2011

A real estate company has filed a lawsuit against the developer for breach of contract.

The delicate situation faced by Newland International Properties Corp., developer of the Trump Ocean Club International Hotel & Tower complex, has been further complicated by a lawsuit filed by a customer, which adds to three other lawsuits filed by other five clients.

Trump Ocean Club Debt Restructuring

November 2011

Holders of bonds issued by Newland International Properties Corp. are willing to become partners in the project because the developer does not have the necessary capital for the next repayment.

On November 15, Newland International Properties Corp., developer of Trump Ocean Club International Hotel & Tower, is due to pay $31 million in amortization of capital to holders of bonds issued to finance the Trump Ocean Club.

Trump Ocean Club Needs to Restructure Debt

October 2011

A proposal has been presented to the bondholders to extend the term of the debt.

$220 million in bonds issued in 2007 to build a luxury apartment building called Trump Ocean Club, owned by tycoon Donald Trump, will be restructured before the next payment of debt, which is due on November 15.

Trump project in Panama downgraded

January 2009

The Fitch assessment provides a glimpse into the way the financial community is reevaluating even well performing developments in the wake of the credit crunch.

Fitch Ratings downgraded $220 million of debt on the Trump Ocean Club project in Panama City, warning price declines “could lead to higher than expected default rates for existing buyers.”

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