Fitch Expects to Rate Panama's Trump Ocean Club Sr. Secured Notes 'BB'

CHICAGONY-FITCH-RATINGS/TRUMP-Fitch Ratings has assigned a preliminary 'BB' Rating to Newland International Properties, Corp.'s (Newland) senior secured notes. Newland is developing the Trump Ocean Club International Hotel & Tower, a multi-use tower located on the Punta Pacifica Peninsula in Panama City, Panama. Fitch currently rates Panama 'BB+' with a Stable Rating Outlook.

When fully developed, Trump Ocean Club expects to have luxury accommodations for both permanent residents and tourists alike. Plans Call for 627 residential condo units, 369 hotel-condo units, a casino, a pier facility, a yacht club, pool decks, retail shops, gourmet restaurants, a fitness center and spa, along with a parking garage of more than 1,400 spaces. All unit sales within the project benefit from a license agreement signed by Newland with Trump International. The target market for sales focuses on upper-income buyers in the US, Canada, Europe and Latin America.

Proceeds from the $220,000,000 will be used to fund a construction escrow account, fund a 6-month debt service reserve account, and repay existing debt. Final maturity of the Notes is 7 years with a 3.5 year interest-only period and semiannual payments.

Credit's strengths for this issuance include:

--Presales amounting to 65% of total expected units have already been recorded. Purchasers pay 30% of the sale price at signing with the remaining 70% due in full upon delivery of the unit.

--The development of Trump Ocean Club will be the singular focus of Newland and strict covenants are in place prohibiting dividends or cash releases to the developer.

The incurrence of additional debt will also be limited. All cash collections and payments for operating expenses and construction, as well as debt service, will be highly regulated by the priority of payments waterfall clearly defined in the indenture.

--A portion of Bond proceeds will serve to fund a construction escrow account sized to cover the remainder of all remaining construction costs. Draws from this Trustee controlled account can only occur after the independent engineer provides certification to that all work has been completed according to plan and that costs are within budget. In addition, draws from the account must be backed by 125% in eligible receivables arising from the sale of units.

Development projects of this scope do contain various risks. Construction risk represents one of the main risks in addition to the liquidity concerns that could arise if sales velocity decreases. Sales at Trump Ocean Club also are correlated to global real estate markets. Fitch believes these risks to be consistent with the preliminary rating level. Independent engineer reports and real estate appraisals were used to facilitate modeling assumptions, which incorporated down side analysis regarding property valuations as well as construction costs.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

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