Friday, September 23, 2011

RAM Ratings reaffirms AAA(bg) rating of Lekir Bulk Terminal's Serial Bonds

Published on 09 September 2011
RAM Ratings has reaffirmed the enhanced rating of AAA(bg) of Lekir Bulk Terminal Sdn Bhd’s (LBT or the Company) RM445 million Serial Bonds (2000/2012) (Serial Bonds), with a stable outlook. The enhanced rating of the Serial Bonds reflects the irrevocable and unconditional guarantee provided by DBS Bank Limited, which carries AAA/Stable/P1 financial institution ratings from RAM Ratings.

LBT is the owner of a deep-water jetty and its related facilities, located adjacent to TNB Janamanjung Sdn Bhd’s (TNBJ) power plant in Lumut, Perak. Under a 25-year Jetty Terminal Usage Agreement (JTUA) with TNBJ, LBT is to make available its jetty facilities – on a non-dedicated basis – for the provision of coal-handling and delivery services from ships berthing at its jetty to TNBJ’s designated delivery point.

On a stand-alone basis, LBT’s credit profile remains supported by the terms of its JTUA; the Company earns fixed payments subject to meeting specific operating parameters, irrespective of the amount of coal handled. These fixed payments adequately cover LBT’s fixed operating costs and its obligations on the Serial Bonds. Meanwhile, LBT’s operations and maintenance (O&M) come under the purview of Lumut Maritime Sdn Bhd, via a 15-year O&M Agreement that has been structured back-to-back with the JTUA’s performance requirements. Since the commencement of its jetty operations, LBT has consistently met all the key performance indicators under the JTUA, which in turn entitles it to full fixed payments.

The Serial Bonds (the only debt in LBT’s books) will be fully redeemed by 6 July 2012. Given the Company’s strong cashflow-generating ability – it is expected to generate around RM44 million of operating cashflow annually - and RM78 million of cash holdings as at end-June 2011, we do not anticipate LBT to encounter any difficulty in promptly meeting its obligations on the Serial Bonds.

While the Company’s current financial profile is not a concern, the management plans to gear up further to support its plan to transform the jetty into a multi-user bulk terminal. However, the proposed expansion has yet to take off. We highlight that the Company’s future expansion may introduce additional business risks, such as O&M risk, counterparty risk and construction risk.

Media contact
Adelia Abdul Rahim
(603) 7628 1055

Asian stocks have fallen after slide in US and Europe

BBC article:

Asian stocks have fallen on Friday, hefollowing a major sell-off in European and US markets.

The drop was triggered by warnings from the International Monetary Fund and World Bank about the strength of the global economy.

South Korea's main Kospi index lost 3.6%, while Australia's ASX shed 0.8%. Japan's Nikkei index is closed for a holiday.

US shares fell on Thursday, after Europe's main indexes lost about 5%.

Thursday, September 22, 2011


Sep 9, 2011 -
MARC has affirmed its AAA and AAAID ratings on The Export-Import Bank of Korea’s (KEXIM) conventional and Islamic Medium Term Notes Programmes with a combined nominal value of RM3.0 billion. The outlook on the ratings is stable. The ratings reflect KEXIM’s public policy role in supporting the Republic of Korea’s (South Korea) export and import industries, its strong standalone financial profile and its full government ownership. The ratings also receive an uplift from the high likelihood of support from the Korean government. Under the KEXIM Act, the government is required to fund the bank if its reserves are insufficient to cover an annual net loss. MARC opines that support from the Korean government will continue in view of KEXIM’s important role in supporting the growth of Korea’s export-oriented economy and the Korean government’s significant capacity to provide liquidity or capital support.

KEXIM is a specialised bank mandated with the role of an export credit agency (ECA) to support Korean international trade transactions. The bank’s activities mainly comprise export credit, overseas investment credit as well as provision of guarantees. As witnessed during the recent 2008 global financial crisis, KEXIM, in common with other ECAs, played a critical role in keeping trade flows open. KEXIM maintained its momentum of financing for Korean exporters with double-digit loan growth of 10.2% in 2010 (2009: 14.5%). Export credits amounted to a significant 56% of total loans at end-2010 (2009: 60%) underpinned by the export-orientation of the Korean economy. However, the most significant contribution towards loan growth in 2010 was from overseas investment credit afforded mainly to fund overseas ventures of Korean corporates. Overseas investment credit expanded by 32% during the year to account for 33% of total loans at end-2010 (2009: 28%). Going forward, the bank expects total credit expansion to be at a more moderate 5.7% in 2011 on the back of an already enlarged loan book.

Being an export credit agency, KEXIM’s loan portfolio is geographically well diversified, with credit exposures extended across the world. Currency and interest rate risks arising from the loan portfolio have thus far been well managed through the use of derivatives. Moreover, the higher concentration risk on the manufacturing and transportation (mainly shipbuilding) sector credit exposures (collectively 62% of loans at end-2010) is somewhat mitigated by the sound credit profiles of the borrowers comprising strong and established Korean corporations, including leading global shipbuilders.

Apart from lending activities, the bank is also notably involved in the issuance of guarantees and acceptances, which stood at KRW68 trillion at end-2010 compared to KRW42 trillion of gross loans at end-2010. However, the volume of outstanding guarantees and acceptances declined by 10.2% during 2010 (2009: decline of 16.5%) as the volume of new business undertakings, for which these instruments were utilised (especially in shipbuilding), declined in the aftermath of the global economic downturn.

The bank’s gross non-performing loan (NPL) ratio has risen marginally to 1.2% at end-2010 from 1.1% at end-2009. However, KEXIM’s gross NPL ratio is still fairly low in an international context and below the Korean banking sector average of 1.9%. The bank’s NPLs are also well provided for, as indicated by a loan loss reserve cover of 303% at end-2010. Going forward, MARC opines that asset quality is likely to remain under pressure until there is a sustained recovery in the global economy and a corresponding improvement in the fortunes of the Korean corporate sector.

Meanwhile, the bank’s financial performance remained weak in 2010 as credit costs increased significantly amidst an unfavourable economic environment to 1.99% of average assets in 2010 from 1.01% in 2009 and from a much more manageable 0.31% in 2008. KEXIM’s return on assets (ROA) improved to 0.15% in 2010 from 0.07% in 2009 on the back of gains from the disposal of available-for-securities (AFS). Excluding gains from these AFS securities, MARC notes that the bank would have reported a net loss equivalent to 0.87% of average assets in 2010. Considering KEXIM’s public policy role, its core profitability is expected to remain constrained going forward as it has been in the past.

Under the KEXIM Act, the Korean government has an obligation to ensure KEXIM’s ongoing solvency. Accordingly, the government has injected a total of KRW1.85 trillion (approximately RM5.0 billion) from 2008 to 2010 to strengthen the bank’s capital structure. Notwithstanding these capital injections, the bank’s Tier 1 and total capital ratios declined to 9.3% and 10.8% respectively at end-2010 from 9.7% and 11.3% respectively at end-2009 as risk-weighted assets increased by 4.7% during the year as compared to a 5.1% contraction reported in 2009. Nevertheless, MARC derives comfort from the demonstrated willingness of the Korean government to ensure that the bank remains adequately capitalised as a result of its strategic and commercial importance to the Korean economy. The most recent of such capital injections was in April 2011 when the government injected KRW1.0 trillion of capital into the bank.

The stable outlook on KEXIM’s ratings reflects MARC’s expectations that there will be no material change in the bank’s operating or credit profile, and the capacity and willingness of the Korean government to support the bank in the near-to-medium term.

Anandakumar Jegarasasingam, +603-2082 2250/;
Ahmad Rizal Ahmad Farid, +603-2082 2253/

Monday, September 19, 2011


Sep 9, 2011 -
MARC has assigned its MARC-1/AA ratings to Hong Leong Financial Group Berhad’s (HLFG) proposed Commercial Paper and Medium Term Notes programmes with a combined limit of RM1.8 billion. At the same time, MARC has also affirmed the ratings on HLFG’s RM800 million Commercial Paper and Medium Term Notes Programme (CP/MTN) at MARC-1/AA. The rating outlook for the long-term rating is stable. The ratings are based on the continued ability of HLFG’s newly enlarged banking subsidiary, Hong Leong Bank Berhad (HLB), to generate strong earnings, the stable financial and operating performance of its insurance business and the well-capitalised positions of both its banking and insurance subsidiaries. Meanwhile, HLFG continues to benefit from comparatively good access to capital markets which MARC views as important given the financial holding company’s reliance on short-term market funding. Further, HLFG’s cash flow interest coverage remains satisfactory for its rating level on account of the strong dividend support from its core subsidiaries. The aforementioned credit strengths are tempered by the very competitive operating environment of the group’s banking and insurance operations and the structural subordination of debts at the holding company-level relative to creditors of the group’s subsidiaries.

HLB and Hong Leong Assurance Berhad (HLA) are the two main contributors to HLFG’s dividend income. HLB recently completed its acquisition of the assets and liabilities of EON Capital Berhad (EON Cap) (EON Cap acquisition) on May 6, 2011. HLA, on the other hand, merged its general insurance business with MSIG Insurance (Malaysia) Berhad (MSIM) in exchange for a 30% equity stake in the enlarged MSIM. The transfer, which was completed in October 2010, was the result of a strategic partnership between HLFG and Mitsui Sumitomo Insurance Company Limited (Mitsui). The partnership also saw Mitsui acquiring 30% equity interest in HLA for a cash consideration of RM940 million. MARC believes that the strategic partnership has generally positive credit implications for the consolidated credit profile of HLFG by improving the business risk profile of its insurance operations and freeing up capital for redeployment into its commercial banking business. HLA will focus on strengthening its life business with the assistance of its strategic partner.
The cash proceeds from the equity divestment will be used to partly fund the EON Cap acquisition while the remainder would be financed by the proposed new programme. In terms of debt levels, MARC expects HLFG’s company-level gearing to be well within the covenanted 1.5 times limit under the new programme. On a pro-forma basis based on HLFG’s end-March 2011 position, the company-level debt-to-equity (DE) ratio will stand at around 0.73 times, assuming full drawdown of the RM1.8 billion programme. Meanwhile, MARC considers holding company double leverage to be appropriate for its ratings. HLFG’s capacity to honour its financial obligations continues to be a function of its ability to access the capital markets and the cash flow upstreaming capacity of HLB and to the lesser extent, HLA. Both factors have remained supportive of HLFG’s debt service capacity.

The financial profile of HLB is characterised by a high degree of stability, sound asset quality, robust liquidity and satisfactory capitalisation. During the nine month period ended March 31, 2011 (3Q2011) HLB reported a 24.6% increase in pre-tax profit (at the bank level) compared to the preceding year corresponding period. The bank’s asset quality has also continuously improved over the years, with the gross non-performing loans (NPL) ratio improving to 2.0% as at end-March 2011 from 3.3% as at June 2007, a reflection of the bank’s discipline lending approach. Meanwhile, HLB’s capitalisation remains adequate, with HLB’s bank-level total capital adequacy ratio (CAR) at 11.9% as at end-March 2011. Meanwhile, HLA reported higher net profit in FY2010, driven by a substantially higher amount of surplus transferred from its life fund. With the merger of its general insurance business with MSIM’s, HLA’s future earnings performance would primarily reflect that of its life business. Going forward, HLA’s ability to upstream cashflow to HLFG would also depend on the financial and strategic benefits of the partnership with Mitsui, amongst others.

Meanwhile, HLFG’s nine-month results for the period ending March 31, 2011 benefited from several one-off items including a one-time gain of RM619.0 million on the transfer of HLA’s general business to MSIM and a surplus transfer from HLA’s life division of RM175.0 million. At the company level, HLFG’s double leverage ratio improved to 86% at end-9MFY2011 (FY2010: 121%).

Rating stability should be underpinned by continued positive developments in the domestic economic environment and the healthy financial profile of HLFG’s core subsidiaries. MARC expects HLFG to maintain a relatively conservative financial policy with regard to dividends and conservative gearing levels in the near-to-intermediate term.

Ahmad Rizal Farid +603-2082 2253 /,
Anandakumar Jegarasasingam +603-2082 2250 /

Thursday, September 15, 2011

RAM Ratings reaffirms Projek Lintasan Shah Alam's debt ratings

Published on 08 September 2011
RAM Ratings has reaffirmed the respective A1 and A3 ratings of Projek Lintasan Shah Alam Sdn Bhd’s (PLSA or the Company) RM330 million Sukuk Ijarah (Senior Sukuk) (2008/2027) and RM415 million Sukuk Mudharabah (Junior Sukuk) (2008/2037), with a stable outlook. PLSA is the concessionaire for the 14.7-km Lebuhraya Kemuning-Shah Alam (LKSA or the Highway) in Selangor.

For the first half of 2011, the Highway achieved an average daily traffic (ADT) of 43,957 vehicles, i.e. about 90% of RAM Ratings’ initial expectation. On this note, ADT at the Alam Impian toll plaza more than doubled our projections while that of the Seri Muda toll plaza was lower than anticipated due to the delayed upgrading works at a feeder road and the expansion of a competing road. Traffic mix, meanwhile, comprised more private vehicles and fewer commercial ones than envisaged. Over the next few years, traffic volume on the LKSA is expected to be supported by the ready catchment area that spans from the Shah Alam Expressway to the Federal Highway 2. Longer-term potential is anticipated to emanate from the progressive development of the Alam Impian township.

Based on RAM Ratings’ sensitised cashflow - which assumes a more gradual ramp-up in traffic volume and an unchanged traffic mix for the Highway from that observed during the initial year of tolling - PLSA is envisaged to register a finance service coverage ratio (FSCR) of at least 1.45 times on the principal repayment dates of the Senior Sukuk. Meanwhile, the minimum Sub-FSCR, which measures the Junior Sukuk’s repayment strength while the Senior Sukuk is still outstanding, is expected to come up to at least 1.19 times. Notably, the financing structure prohibits any outflow to the Junior Sukuk until 2025 while distributions to shareholders are not permitted as long as the Senior Sukuk remains outstanding, i.e. until 2027. These restrictions protect the Senior Sukuk holders’ interests and are crucial as the Company is expected to be relying on its cash holdings - from RM72.13 million of construction cost savings - to service its debt obligations over the next 4-5 years while traffic volume builds up for the LKSA.

Nonetheless, the Company may only have a very thin cash buffer by end-April 2027, after pre-funding the final tranche of the Senior Sukuk. As such, PLSA is expected to carefully manage its accumulated cash reserves in anticipation of the lumpy principal repayment. RAM Ratings will maintain a close watch on the Highway’s performance as it is crucial that LKSA achieves the expected ramp-up in traffic volume to preserve its debt-servicing ability.

Other rating considerations, which are inherent for all tolled roads, include regulatory and single-site risks.

Media contact
Jocelyn Chiang
(603) 7628 1124

Wednesday, September 14, 2011

RAM Ratings reaffirms Sabah Ports debt ratings

Published on 07 September 2011
RAM Ratings has reaffirmed the respective AA3 and AA3/P1 ratings of Sabah Ports Sdn Bhd’s (“Sabah Ports” or “the Company”) RM80 million Bai’ Bithaman Ajil Debt Securities (2007/2017) (“BaIDS”) and RM70 Million Murabahah Underwritten Notes Issuance Facility/Islamic Medium-Term Notes Facility (2007/2014) (“MUNIF/IMTN”); both long-term ratings have a stable outlook. 

Sabah Ports plays an important role in supporting Sabah’s economy as shipping is the most cost-effective method of transporting imports and exports, which constitute commodities such as palm oil and petroleum. While Sabah Ports’ first right of refusal with respect to all new port undertakings outside its port limits ended in 2009, we believe there is limited need for another major port as the existing facilities effectively cater to Sabah’s main population and economic centres. The Company’s strong operating track record further rules out the possibility of new port operators replacing the services it provides. 

Sabah Ports maintained its steady financials in fiscal 2010. Revenue increased 12.2% to RM211.68 million on the back of a steady rise in cargo volume handled. Profitability stayed strong as the Company registered a margin on adjusted operating profit before depreciation, interest and taxation of 58.4%, backed by ongoing cost-cutting initiatives. Adjusting for lease obligations, Sabah Ports’ debt level stood at RM557.91 million as at end-December 2010, which translated into a gearing ratio of around 1 time and a lease-adjusted funds from operations debt coverage (“FFODC”) ratio of 0.24 times. Looking forward, we expect the Company to maintain a sound balance sheet and steady debt-coverage measures over the next 5 years, with a projected average gearing ratio of 0.67 times and an FFODC ratio of 0.22 times. 

Meanwhile, the ratings are still moderated by the capital-intensive nature of Sabah Ports’ business and its sensitivity to economic cycles. On that note, the Company’s future capital commitments are expected to be largely covered by internal funds. While the Asian financial crisis (1997/98) and the more recent global financial slump (2008/09) had led to contractions in Sabah Ports’ cargo volumes, liquid cargo - which is generally more lucrative and accounts for around half of the Company’s annual throughput - had held steady, without any volume contraction.

Media contact
Davinder Kaur Gill
(603) 7628 1118

Monday, September 12, 2011


Sep 6, 2011 -
MARC has affirmed its AAA ratings on Class Auto Receivables Berhad’s (Class Auto) RM395.0 million Class A, RM20.0 million Class B and RM20.0 million Class C Notes (collectively known as Notes Series 2007-A). Notes Series 2007-A represents the first series of issuances backed by a RM500.0 million portfolio of hire purchase receivables (Portfolio 2007-A) under Class Auto’s RM10.0 billion Medium Term Notes (MTN) Programme. The rating outlook for the notes has been maintained at stable. The affirmation of the ratings reflects increased credit enhancement levels for the notes, attributable to the collateral pool’s strong performance.

Class Auto is a special purpose vehicle incorporated for the purpose of securitising hire purchase receivables originated by CIMB Bank Berhad (CIMB Bank) on behalf of Proton Commerce Sdn Bhd (PCSB) via the RM10.0 billion nominal value asset-backed MTN programme. PCSB is the beneficial owner and servicer of Portfolio 2007-A pursuant to the joint venture agreement entered into between CIMB Bank and Proton Holdings Berhad’s marketing arm, Proton Edar Sdn Bhd (PESB). PCSB was established with the objective of offering competitive financing products to new Proton car purchasers, leveraging on PESB’s extensive distribution network throughout Malaysia and the infrastructure facilities offered by CIMB Bank.

Portfolio 2007-A at transaction close comprised hire purchase receivables of new Proton cars, with a minimum seasoning of three months and loan-to-value ratios of less or equal to 90%. Monthly collections from Portfolio 2007-A are allocated for the servicing of the coupon and principal payments for the rated notes. Under the transaction, collections from Portfolio 2007-A are held back with the servicer for one day before being remitted to the series collection account. Nonetheless, MARC is of the opinion that the one-day commingling risk is mitigated by CIMB Bank’s strong credit standing (rated AAA/MARC-1/Stable).

As of June 30, 2011 (the reporting date), credit enhancement levels for the outstanding Class A, Class B and Class C notes registered at 304.0%, 229.9% and 184.8% respectively (initial rating: 126.6%; 120.5%; 114.9%) supported by RM188.06 million in hire purchase receivables and a RM6.29 million Collection Account balance. Credit enhancement levels have continued to improve with Portfolio 2007-A’s stable performance and offer more protection against default risk and prepayment risk. On the reporting date, the collateral pool’s outstanding principal balance RM188.06 million showed cumulative default and cumulative prepayment rates of 1.17% and 13.73% respectively. Over the past year, Class Auto has made early redemptions of up to RM89.0 million in Class A notes, leaving RM102.0 million of notes outstanding: Class A - RM62.0 million; Class B - RM20.0 million; and Class C – RM20.0 million.

MARC expects Portfolio 2007-A to continue performing well based on its credit quality, historical behaviour and our assessment of economic conditions. Based on the foregoing analysis, MARC concludes that available credit enhancement will adequately support the AAA ratings for all three classes of notes.

Ruben Khoo Sheng Luen, +603-2082 2265/;
Sandeep Bhattacharya, +603-2082 2247/

Friday, September 9, 2011

RAM Ratings reaffirms AAA rating of Sabah State Government's bonds

Published on 05 September 2011
RAM Ratings has reaffirmed the AAA rating of the Sabah State Government’s (State Government) RM544 million Bonds (2009/2014) (the Bonds); the long-term rating has a stable outlook. The rating reflects Sabah’s rich natural wealth that remains key to spurring its economic growth and the State Government’s strong revenue-adjustment capacity, its healthy fiscal position, and supportive relationship with the Federal Government. These strengths balance the challenge of unlocking Sabah’s long-term development potential.

Given the wider taxation rights conferred exclusively to the East Malaysian states under the Federal Constitution, Sabah has traditionally generated robust revenues and strong fiscal surpluses. This remained status quo in 2010, when Sabah recorded a fiscal surplus of RM730.3 million on the back of RM4.2 billion of revenue. As at end-2010, the State’s cash balances summed up to RM2.8 billion against its RM3.1 billion debt load.

Sabah’s primary sector helps ensure that the State maintains its strategic position within the national economy, as a major contributor to the production/export of Malaysia’s 2 main commodities, i.e. palm oil (roughly 30% of the country’s total production) and crude petroleum (approximately 25% of the nation’s exports). The tourism sector – which forms part of the State’s tertiary sector - also remains a key economic contributor.

Despite its natural resources, Sabah still lags behind its national peers in overall development. The State has high levels of unemployment and poverty, which are duly noted by both the Federal and State Governments; both parties are attempting to address this issue via short-, medium- and long-term development plans. These include the Tenth Malaysia Plan and the Sabah Development Corridor, as well as the State’s own Halatuju Pembangunan dan Kemajuan Negeri Sabah.

Media contact
Ramnath Sundaram
(603) 7628 1074


Aug 26, 2011 -

MARC has affirmed its rating on property developer Sunrise Berhad’s (Sunrise) RM400 million Islamic Medium Term Notes (IMTN) facility at A+ID and maintained the issue’s stable rating outlook. Sunrise continues to exist as a separate corporate entity after its acquisition by UEM Land Holdings Berhad (UEM Land) without major changes to its business strategy. The rating action reflects MARC’s view that Sunrise’s business and credit profiles have not changed materially since MARC’s last rating action in February 2011 when the rating agency removed the property developer’s issue rating from MARCWatch Developing. The rating action also takes into consideration Sunrise’s market leadership in the high-end residential development segment, higher-than-industry average operating margin, reasonably good earnings visibility and modest gearing. These positive rating factors are, however, tempered by a softening trend in the high-end property sector, resulting in slower pace of sales and deferred launches. Some uncertainties remain regarding the ongoing integration of Sunrise into UEM Land. MARC will continue to monitor the progress and success of Sunrise’s operational and cultural integration into UEM Land, which appears to be proceeding at a measured pace.

Among the pioneer developers of high-end residential properties in the Klang Valley, Sunrise has built its reputation with a well-regarded flagship project in the Mont’ Kiara vicinity, where it has a balance of 72 acres of land for future development. Intensifying competitive pressures in the high-end condominium segment in the Klang Valley as well as slower approval process may have contributed to fewer launches and lower earnings. Since January 2010, the company had launched only one high-end condominium project in the Mont’ Kiara area, namely 28 Mont’ Kiara, which registered a 48% take-up rate as at end February 2011. Sales have since improved following the provision of additional incentives to buyers. Sunrise’s other launches were a commercial project, Summer Suites, in January 2011 and a mixed-development project, Quintet in Vancouver, in September 2010, both of which have recorded 60% and 87% take-up rates respectively. In the longer term, MARC believes that Sunrise’s property development business could benefit from its integration into UEM Land given its parent’s sizeable landbank in Johor. This would also enable the company to diversify its property projects from the Klang Valley, in particular the Mont’ Kiara vicinity, to minimise project concentration risk.

For the 12 months ended June 30, 2010 (FY2010), Sunrise’s revenue and pre-tax profit declined to RM590.7 million (FY2009:RM803.9 million) and RM180.9 million (FY2009: RM205.8 million) respectively due to fewer launches from the previous corresponding period. Its weakening earnings trend continued into the second half of calendar year (6MFY2011) with revenue and pre-tax profit registered at RM338.5 million (6MFY2010: RM348.6 million) and RM77.8 million (6MFY2010 : RM97.4 million) respectively. Sunrise will be relying on its expected billings from contracted sales (unbilled sales) of RM1.2 billion from ongoing projects to sustain its earnings. As at February 28, 2011, Sunrise’s planned future property development projects for the next five years have an estimated gross development value of RM6 billion.

Sunrise’s balance sheet liquidity as reflected by its cash and cash equivalents of RM164 million as at December 31, 2010, adequately addresses its short-term liabilities of RM105 milllion. MARC believes that Sunrise’s comfortable liquidity position and light near-term debt maturity profile should enable it to maintain a stable financial profile. The debt-to-equity (DE) ratio increased to 0.72 times as at December 31, 2010 (FY2010: 0.48 times) mainly on account of the RM100 million IMTN drawdown. The ratio remains within the covenanted DE cap of 1.0 time. Sunrise has no near-term IMTN maturities; the next two redemptions of RM100 million IMTN each are scheduled in February 2013 and April 2014 respectively.

The stable rating outlook reflects MARC’s expectations that Sunrise’s credit metrics will be in line with its current ratings and that there will be no destabilising changes arising from its integration into UEM Land.

Nisha Fernandez, 03-2082 2269/;
Nur Nadia Maliami, 03-2082 2263/;
Rajan Paramesran, 03-2082 2233/

Wednesday, September 7, 2011


MARC has withdrawn its AAAID(bg) and BB+ID ratings on Viable Chip (M) Sdn Bhd's (VCSB) RM50.0 million nominal value Bank Guaranteed Bai' Bithaman Ajil Islamic Debt Securities (BaIDS A) and RM150.0 million nominal value of Bai' Bithaman Ajil Islamic Debt Securities (BaIDS B) respectively at the request of the sole BaIDS holder, Acqua SPV Bhd (ASPV). The ratings withdrawal affects RM200 million of outstanding BaIDS issued under the aforementioned facilities.

ASPV, a wholly-owned subsidiary of Pengurusan Aset Air Berhad (PAAB), has acquired all of VCSB's outstanding BaIDS under the rated debt facilities. ASPV has approved and consented via resolution to the removal of the rating requirements for the BaIDS and conversion of the BaIDS from publicly traded obligations to non-transferable and non-traded obligations.

VCSB's ratings were last downgraded on April 6, 2011 to reflect the rating agency's concerns over the continuing deterioration in the investment holding company's liquidity position. The stalled restructuring of the Selangor water sector had adversely affected the dividend paying capacity of SPLASH Holdings in which VCSB holds a 30% equity stake and consequently, VCSB's finances.

Upon the withdrawal of the ratings, MARC will no longer carry out rating surveillance obligation on the BaiDS.

Contacts: David Lee, +603-2082 2255/;
Sandeep Bhattacharya, +603-2082 2247/

August 26, 2011

Tuesday, September 6, 2011

RAM Ratings reaffirms MAA Holdings' debt ratings

Published on 05 September 2011
RAM Ratings has reaffirmed the respective long- and short-term ratings of MAA Holdings Berhad’s (MAA Holdings or the Group) RM200 million Commercial Papers/Medium-Term Notes (CP/MTN) Programme (2007/2014), at B1 and NP. The negative outlook on the long-term rating has been maintained. At the same time, the AAA(bg) rating of the first RM200 million MTN issue (2007/2012) under MAA Holdings’ CP/MTN Programme (the First Issue), which is guaranteed by DBS Bank Ltd (DBS Bank), has also been reaffirmed with a stable outlook. DBS Bank is rated AAA/Stable/P1 by RAM Ratings. The enhanced rating of the First Issue reflects the unconditional and irrevocable guarantee extended by DBS Bank; this enhances the credit profile of the debt issue beyond MAA Holdings’ inherent or stand-alone credit profile.

MAA Holdings’ stand-alone credit profile reflects the weak business profile of its core subsidiary, Malaysian Assurance Alliance Berhad (MAA Assurance). MAA Assurance’s life-insurance underwriting performance has deteriorated significantly in the last few years as a result of sizeable underwriting losses, mainly attributable to intense competition from larger players and the shift in its product strategy towards less capital-intensive insurance products following the implementation of the Risk-Based Capital (RBC) framework. Although MAA Assurance’s underwriting performance was supported by higher investment income in FYE 31 December 2010 (FY Dec 2010), which resulted in a surplus of RM59.5 million after taxation, this was still lower than the previous year’s RM183.0 million. At the same time, its general-insurance business turned around with a small underwriting profit, after several years of underwriting losses. Given its considerably weak earnings accretion, MAA Assurance’s capital reserves have been insufficient to meet the more stringent RBC requirements which took effect in 2009.

To meet the final MTN payment of RM140 million that must be deposited into the Debt Service Reserve Account (DSRA) by 6 December 2011, MAA Holdings will use part of the sale proceeds from the disposal of MAA Assurance and 4 other subsidiaries (Identified Subsidiaries) to Zurich Insurance Company Ltd (Zurich Insurance). On 20 June 2011, MAA Holdings entered into a conditional sale and purchase agreement with Zurich Insurance to dispose of the Identified Subsidiaries for RM344 million cash (subject to revision) (Proposed Disposal). Pending the approval of MAA Holdings’ shareholders and the fulfilment of the necessary conditions, the Proposed Disposal is expected to be completed by end-September 2011. To meet the requirements of the RBC framework, Zurich Insurance is expected to recapitalise MAA Assurance upon acquisition.

The rating outlook may be reverted to stable if the sale of the Identified Subsidiaries can be completed well before 6 December 2011, when MAA Holdings will be required to deposit the final MTN repayment of RM140 million into the DSRA. On the other hand, the Group’s ratings will face further downward pressure if the sale of the Identified Subsidiaries is delayed or falls through.

Media contact
Shireen Ng
(603) 7628 1021

RAM Ratings reaffirms OSK Investment Bank's A1/P1 ratings, with stable outlook

Published on 16 August 2011
RAM Ratings has reaffirmed OSK Investment Bank Berhad’s (OSK Investment Bank or the Bank) long- and short-term financial institution ratings at A1 and P1, respectively. Concurrently, the A2 rating of the Bank’s RM400 million Medium-Term Notes Programme (MTNs) has also been reaffirmed. Both the long-term ratings have a stable outlook. The 1-notch rating differential between the A1 financial institution rating and the A2 rating of the MTNs reflects the subordination of the debt facility to the Bank’s senior unsecured obligations. The ratings reflect OSK Investment Bank’s established position in the stockbroking arena and earnings diversification from its geographical expansion.

Besides building on its existing operations, OSK Investment Bank has also continued expanding abroad. The Bank purchased a 51.1%-stake in BFIT Securities Public Company Limited, a Thai stockbroking firm, in July 2011 and is making a mandatory tender offer for the remaining shares not already held by them. The mandatory tender offer is expected to be completed in the third quarter of this year; this acquisition will enhance the Bank’s cross-border capabilities within ASEAN. The previous month, OSK Investment Bank had injected RM33 million into its Indonesian subsidiary, PT OSK Nusadana Securities Indonesia, to support its business growth. We believe that the Bank’s overseas expansion will further diversify its earnings base; profit contributions from its foreign and local operations are expected to be evenly split within the next 3-5 years.

Despite stronger brokerage income amid a more buoyant stock market last year, OSK Investment Bank’s pre-tax profit declined to RM133.2 million (FY Dec 2009: RM179.9 million), mainly due to heftier operating expenses and RM46.5 million of impairment losses on securities. Nonetheless, the Bank remained well capitalised, with respective tier-1 and overall risk-weighted capital-adequacy ratios of 25.1% and 31.8% as at end-March 2011.

Media contact
Amy Lo
(603) 7628 1078

Monday, September 5, 2011

It’s the Revenge of The Chicken. And it’s back!

Remember the Chicken game on Well it’s back! So, who’s gonna be chickening out? Well, don’t hold on it too long because there’s a pot of RM60,000 & you do not wanna miss out on a share of this!

Tune into in September to find out who’s the bigger chicken!

Guidelines & Circulars listing on Bank Negara Malaysia's website

Guidelines on Data Management and MIS Framework has been updated.

The PDF format document are available for download via the URL provided below:

RAM Ratings reaffirms OCBC's AAA/P1 ratings

Published on 24 August 2011
RAM Ratings has reaffirmed OCBC Bank (Malaysia) Berhad’s (“OCBC” or “the Bank”) respective long- and short-term financial institution ratings at AAA and P1. Concurrently, all the long-term ratings of the Bank’s debt issues have been reaffirmed, with a stable outlook. OCBC’s ratings remain supported by its established franchise in mid-sized corporates as well as small and medium-sized enterprises, sound asset quality, and commendable profitability as well as capitalisation. The Bank continues to derive financial flexibility from OCBC Ltd, its parent company that is also Singapore’s second-largest banking group; the latter held SGD229.28 billion of assets as at end-December 2010. In addition, OCBC benefits from its parent’s regional network and adopts its best practices.

In fiscal 2010, OCBC’s gross loans expanded 10.4% year-on-year (“y-o-y”) while its share of the industry’s loans remained at around 4%. The Bank’s asset-quality indicators continued to hold up, supported by an established credit-underwriting framework and effective management of delinquencies. OCBC’s gross impaired-loan ratio stood at 2.6% as at end-March 2011 (end-December 2009: 3.8%). Notably, the Bank’s pre-tax profit surged 17.1% y-o-y in fiscal 2010, buoyed by broad-based income growth and lower provisioning charges.

As at end-March 2011, the Bank’s overall risk-weighted capital-adequacy ratio had strengthened to a healthy 15.3%, following the issuance of RM500 million of subordinated bonds in late 2010. Given the keen competition for customer deposits, OCBC’s loan growth has been outstripping that of its deposits. As a result, its loans-to-deposits ratio climbed up from 76.2% as at end-December 2009 to 82.8% as at end-March 2011, albeit still deemed comfortable.

Note: A 1-notch differential between OCBC’s financial institution rating and issue rating reflects the subordination of the debt facility to the Bank’s senior unsecured obligations. A 2-notch rating differential reflects the deeply subordinated nature and embedded interest-deferral feature of the rated instrument.

Media contact
Joanne Kek
(603) 7628 1163

Friday, September 2, 2011

US 'to sue a dozen banks over housing bubble mortgages'

The US is planning to sue more than a dozen major banks for misrepresenting the quality of mortgages they sold during the housing bubble, the New York Times reports.

The Federal Housing Finance Agency will argue that the banks should have known the securities were not sound.

Bank of America, JPMorgan Chase, and Goldman Sachs are to face action, the newspaper quotes sources as saying.


RAM Ratings puts Esso's P1 rating on Rating Watch, with negative outlook

Published on 26 August 2011
RAM Ratings has placed the P1 rating of Esso Malaysia Berhad’s (Esso or the Company) RM300 million Islamic Commercial Papers Issuance Programme (2011/2018) (Sukuk Programme) on Rating Watch, with a negative outlook. The Rating Watch is premised on our concerns that Esso's credit profile would deteriorate after the exit of its controlling shareholder, Exxon Mobil Corporation (ExxonMobil), following Philippines-based San Miguel Corporation’s (San Miguel or the Group) proposed acquisition of ExxonMobil’s entire 65%-stake in Esso.

Esso’s P1 rating had incorporated ongoing support and expectation of high likelihood of extraordinary support from its parent, ExxonMobil. “As an integral part of ExxonMobil’s business in Malaysia, Esso benefits from the sharing of technology and technical expertise. The Company is also able to leverage on the financial strength of ExxonMobil. As at end-June 2011, about 60% of Esso’s short-term borrowings comprised loans from ExxonMobil’s affiliates. As such, the impending change in Esso’s majority shareholder is expected to have an adverse impact on the Company’s credit profile,” opines Kevin Lim, RAM Ratings’ Head of Consumer and Industrial Ratings.

As the world’s largest non-state-owned integrated oil and gas major, ExxonMobil’s financial metrics remained robust as at end-December 2010, with a funds from operations (FFO) debt cover of about 3.0 times and a gearing ratio of under 0.5 times. It boasted a superior liquidity position, with USD8.45 billion of cash reserves against USD2.79 billion of short-term debts. In contrast, San Miguel’s financial standing is weaker; its FFO debt cover stood at about 0.1 times with its gearing ratio came up to around 1.5 times as at the same date.

Traditionally involved in the food, beverage and packaging businesses, San Miguel has diversified into the petroleum, power, mining and infrastructure industries. Its assets include the Philippines’ largest oil-refining and marketing company, with a 38%-share of its local market. The Group had previously made known its near—to-medium-term plans that include investing in new businesses. An aggressive debt-funded expansion strategy could further impinge upon the Group’s financial metrics. Furthermore, we have no visibility on San Miguel's financing plans for the Esso acquisition.

We understand that the completion of the transaction is subject to many levels of approval that could take up to 12 months to secure. In the interim, Esso’s operations are expected to remain status quo and that the Company will continue benefiting from the financial muscle of ExxonMobil.

The Rating Watch will be resolved once we have conducted an assessment of San Miguel and the possible implications of the acquisition on Esso’s business and financial risk profiles. The P1 rating could be lowered if there is a wide disparity between the credit profiles of ExxonMobil and San Miguel and/or deterioration in Esso’s business and financial risk profiles arising from ExxonMobil’s exit. We may reaffirm the rating if our assessment indicates that Esso's new ownership structure will be able to provide strong financial support to the Company and have no material negative impact on its business risk profile, along with a financial risk profile that remain within the rating parameters.
On 17 August 2011, Esso announced that San Miguel had proposed to acquire the Company’s 175,500,000 ordinary shares - representing 65% of Esso’s voting shares - from ExxonMobil International Holdings Inc, pursuant to a sale and purchase agreement executed on the same day. Upon completion of the proposed acquisition, San Miguel is required to extend a mandatory takeover offer to acquire the remaining Esso voting shares it does not already own. Concurrently, San Miguel has proposed to acquire ExxonMobil’s wholly owned affiliates, ExxonMobil Malaysia Sdn Bhd and ExxonMobil Borneo Sdn Bhd.

RAM Ratings' Rating Watch highlights a possible change in an issuer's sukuk rating. It focuses on identifiable events such as mergers, acquisitions, regulatory changes and operational developments that place a rated sukuk under special surveillance by RAM Ratings. In a broader sense, it covers any event that may result in changes in the risk factors relating to the repayment of principal and interest.

Issues will appear on RAM Ratings' Rating Watch when some of the above events are expected to or have occurred. Appearance on RAM Ratings' Rating Watch, however, does not inevitably mean that the rating will be changed. It only means that a rating is under evaluation by RAM Ratings and a final affirmation is expected to be announced. A "positive" outlook indicates that a rating may be raised while a "negative" outlook indicates that a rating may be lowered. A “developing” outlook refers to those unusual situations in which future events are so unclear that the rating may potentially be raised or lowered.

Media contact
Evelyn Khoo
(603) 7628 1075
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