MARC DOWNGRADES KINSTEEL BERHAD’S LONG-TERM ISLAMIC DEBT RATINGS TO CID, MAINTAINS RATINGS ON MARCWATCH NEGATIVE

Aug 29, 2013 -

MARC has downgraded its Islamic debt ratings on the medium-term notes issued by Kinsteel Berhad (Kinsteel) under its RM100 million Murabahah Commercial Papers/Medium Term Notes (CP/MTN) Programme and RM100 million Murabahah Medium Term Notes (MTN) Programme to CID from BB+ID respectively. Its short-term rating on commercial papers issued under the CP/MTN Programme remains at MARC-4ID. All ratings remain on MARCWatch Negative.

The long-term rating downgrades incorporate the company’s weak financial condition and decision to seek indulgence for an extension of payment due on August 28, 2013 on RM40 million of Murabahah Commercial Papers (MCP) to September 5, 2013. Its sole MCP holder has granted an extension of payment due to September 5, 2013. MARC’s view does not take into account any specific knowledge of any debt restructuring plans. Apart from the outstanding commercial papers, Kinsteel has outstanding MTNs of RM60 million under its Murabahah MTN Programme on which the forthcoming repayment of RM10 million on September 6, 2013 has been fully funded. MARC believes that the very short-term maturity extension on the MCPs signals ongoing liquidity pressure and heightened risk of further debt maturity extensions.

In the event the company fails to make payment on the RM40 million MCPs during the grace period, Kinsteel’s short-term Islamic debt rating of MARC-4ID will be lowered to DID. The long-term ratings will be lowered to DID upon confirmation of the company’s failure to make full and timely payment on the scheduled repayment dates or accelerated date of repayment, as the case may be.

Contacts:

Taufiq Kamal, +603-2082 2251/ taufiq@marc.com.my;

Rajan Paramesran, +603-2082 2233/ rajan@marc.com.my.