MARC REMOVES RADICARE SDN BHD'S RATINGS FROM MARCWATCH NEGATIVE; AFFIRMS RATINGS WITH A NEGATIVE OUTLOOK

Nov 3, 2011 -
MARC has removed its MARC-1/A+ ratings on Radicare Sdn Bhd’s RM100 million CP/MTN facility from MARCWatch Negative following a six-month extension of its hospital support services concession which expired on October 28, 2011. The recent extension has alleviated near-term downward pressure on the company’s debt rating. Radicare’s issue ratings are affirmed at MARC-1/A+ with a negative outlook. MARC had placed Radicare’s MARC-1/A+ ratings on MARCWatch Negative on June 28, 2011 due to increased uncertainty regarding the extension of its expiring concession.

MARC understands that the company intends to utilise the remaining RM53 million available for drawdown under the facility. While the government’s decision in granting a six-month extension allays some concerns regarding the risk of non-renewal of its concession, the continuing uncertainty over new concession terms and the likely impact on Radicare’s business and financial profile do not support a return to a stable rating outlook. MARC further notes the recent lengthening of Radicare’s collection period and the increased potential for timing mismatches between cash flows from trade receivables and obligations on the rated notes. A key offset to the risks in MARC’s view is Radicare’s on-balance sheet trade receivables of RM188 million as of September 30, 2011, the bulk of which is due from the government and cash and cash equivalents on hand of RM43.5 million (excluding sinking fund balances of RM4.4 million). All outstanding notes under the rated facility continue to be fully backed by assigned receivables from the government.

MARC will closely monitor developments with respect to Radicare’s concession and its credit profile to resolve the negative outlook.

Contacts:
Nisha Fernandez, +603-2082 2269/ nisha@marc.com.my;
Rajan Paramesran, +603-2082 2233/ rajan@marc.com.my.