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Rating Action:

Moody's confirms Newland's senior secured rating at B2, outlook is negative

 The document has been translated in other languages

18 May 2010

US$220 million in securities affected

New York, May 18, 2010 -- Moody's confirmed Newland International Properties, Corp.'s B2 senior secured rating and changed the outlook to negative. This concludes Moody's review started on April 5, 2010.

The rating confirmation reflects Newland's successful resolution relating to a shortfall in the construction escrow account of approximately US$27 million, which the developers were required to replenish within ten business days of receipt of the Independent Engineer's Evaluation Report (received May 3, 2010). Failure by the developers to pay the required shortfall would have constituted an event of default under the bond indenture resulting in the bond becoming due and payable immediately.

The company also successfully completed a consent solicitation launched on May 6, 2010 (and which expired on May 14, 2010) to make certain amendments to the indenture document including modification of the definitions of the Collateralization and Withdrawal Ratios, allowing funds on deposit to flow through the Collateral Accounts more promptly and modifying the requirement to retain on deposit an amount equal to twice the amount of the next interest and principal payment. In addition, Newland successfully negotiated a cap on royalties related to the sale of units paid to Trump pursuant to a licensing agreement, which will result in a reduction in aggregate fees of $11.5 million. A bulk sale on 27 units for approximately $6.1 million with a one-year exercise call option to repurchase the units for approximately $7 million was also announced.

The negative rating outlook reflects Moody's concerns regarding the ultimate collection of remaining balances on sold hotel and condo units upon completion and delivery, particularly as delivery of units commence at the beginning of 2011. In addition, some uncertainty remains as to the cash generation ability of the project to sustain all of the bond interest payments for the next twelve months.

A ratings upgrade is unlikely at this time as the project is not yet fully constructed and units have not been delivered. Despite the substantial pre-sales, uncertainty remains regarding full collection upon delivery of units, total sales and sales proceeds, as well as the global economic outlook. Moody's noted that the construction of the project is fully funded with the proceeds from the notes issuance. These funds are all in an escrow account. Additionally, Moody's acknowledges that Trump Ocean Club is one of the few projects of this type that continues to be viable during the economic crisis, given that Newland's management has been able to successfully manage the construction process and sales while remaining in compliance with all financial requirements. A downgrade would result from any missteps in construction that delays the current planned delivery of units. Difficulties in making future interest payments on the bond would also place negative pressure on the rating, although Moody's views this as unlikely given the recent amendments to the bond indenture. Finally, any issues in the delivery process of units, including foreclosures above the current projected rate of 5% would result in a downgrade.

The following rating was confirmed with a negative outlook:

Newland International Properties, Corp. -- senior secured debt rating at B2

Moody's last rating action with respect to Newland was on April 5, 2010, when Moody's downgraded Newland's rating to B2 from B1 and placed the rating on review for possible downgrade.

Newland International Properties Corp. is a sociedad anónima organized under the laws of the Republic of Panama. Newland is a real estate development company established to develop the "Trump Ocean Club International Hotel & Tower" in Panama City, Panama. Trump Ocean Club is being developed as a multi-use luxury tower, overlooking the Pacific Ocean, with luxury condominium residences, a hotel condominium, a limited number of offices, and premier leisure amenities. Trump Ocean Club will be located on the Punta Pacifica Peninsula in Panama City, on approximately 2.8 acres (11,200 square meters) of land, including approximately 295 lineal feet (90 lineal meters) of oceanfront.

Newland's ratings were assigned by evaluating factors we believe are relevant to the credit profile of the issuer, such as i) the business risk and competitive position of the company versus others within its industry, ii) the capital structure and financial risk of the company, iii) the projected performance of the company over the near to intermediate term, and iv) management's track record and tolerance for risk. These attributes were compared against other issuers both within and outside of Newland's core industry and the company's ratings are believed to be comparable to those of other issuers of similar credit risk.

Other methodologies and factors that may have been considered in the process of rating Newland can also be found in the Ratings Methodology subdirectory on Moody's website.

New York
Griselda Bisono
Analyst
Commercial Real Estate Finance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Philip Kibel
Senior Vice President
Commercial Real Estate Finance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's confirms Newland's senior secured rating at B2, outlook is negative
No Related Data.
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