Obama announces US deficit deal between party leaders

US President Barack Obama says Republican and Democratic leaders have reached an agreement on raising the US debt limit and avoiding default.




He said the deal would cut $1tn of spending over 10 years, and set up a committee to report by November on a proposal to further reduce the deficit.

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MARC AFFIRMS SPORTS TOTO MALAYSIA SDN BHD’S RM800 MIILION MTN PROGRAMME RATING AT ‘AA-’

Jul 29, 2011 -

MARC has affirmed its AA- rating on Sports Toto Malaysia Sdn Bhd’s (Sports Toto) Medium Term Note Programme (MTN) of up to RM800 million with a stable outlook. Maintenance of Sports Toto’s rating is premised on the strong cash flow generating ability of its gaming operations and its entrenched market position in Malaysia’s numbers forecast operations (NFO) industry. MARC notes Sports Toto’s longstanding operational track record and its ability to respond to competitive threats in the gaming industry by varying prize structure and offering new variations to its games. Nonetheless, MARC notes a slight weakening in its market share in recent years. Moderating Sports Toto’s credit strength is a high dividend payout policy which constrains cash retention at the company level and exposure to regulatory risk, including the potential impact of changes in gaming taxes.



Sports Toto is a wholly-owned subsidiary of Berjaya Sports Toto Berhad (BToto), a member of the Berjaya group of companies and is one of a select few licensed gaming companies offering number forecast operations (NFO). Sports Toto has the largest branch network among its peers and offers the highest number of games. At the same time, MARC takes note of the competitive inroads that its nearest rival, Magnum Corporation Berhad, has made into its leading market share with its 4D jackpot game introduced in September 2009. Sports Toto responded to this competitive challenge by introducing an identical game on June 9, 2011, the earnings impact of which has been positive and would be visible to a greater extent in fiscal 2012 earnings.

For financial year ended April 30, 2011 (FY2011), Sports Toto posted a flat revenue while pre-tax profit declined by 11% year-on-year (FY2010: -4.9%). In addition to the stiff competition, the company’s weaker financial performance is attributed to the higher pool betting duty of 8% introduced in June 2010 from 6% previously. Operating profit margin fell to 15.2% in FY2011 (FY2010: 16.6%). The recent imposition of higher pool betting duty and the annual licence renewal process underscore MARC’s concern that NFO players will continue to be susceptible to government regulatory risk. However, MARC believes that licence renewal risk is somewhat mitigated by Sports Toto’s longstanding operational track record. MARC believes that the sizeable tax revenues generated by the NFO gaming segment lessen the risk of unfavourable government policy shifts. MARC notes that following the pool betting duty hike of 2%, the government had acceded to a reduction in prize structure for a specific prize category, which has helped NFO players mitigate the impact of the duty hike on profit margins.

Sports Toto retains a strong level of cash generation ability as reflected by cash flow from operations (CFO), which remained a resilient RM340.4 million in FY2011 from RM405.4 million in FY2010. MARC expects the strong liquidity position to be maintained in the near-term given the lack of upcoming short-term obligations or major capital expenditure. The company has drawn down RM550 million under the RM800 million MTN facility, of which RM380 million was utilised to retire the debt of its holding company, BToto. MARC observes that significant intercompany loans to BToto have been a recurrent feature of Sports Toto’s balance sheet, constituting about 60.8% (or RM742.7 million) of its total asset composition as at unaudited FY2011 (FY2010: 61.9% or RM529.8 million). Under the terms of the MTN issuance, any new loans to holding companies are to be structured with acceptable repayment schedules that support timely repayment of the notes.

Sports Toto continues to maintain a high dividend payout policy; dividends paid amounted to 149.3% of its unaudited profit after tax of RM342.4 million in FY2011 (FY2010: 69.9%). Sports Toto’s debt service cover ratio (DSCR) of 5.62 times as at FY2011 (FY2010: 2.72 times) provides a comfortable covenant compliance headroom vis-à-vis the minimum covenanted level of 1.50 times. Nonetheless, MARC notes that the strong DSCR was achieved in FY2011 in the absence of any debt repayment. While there are no debt repayments due under the MTN facility until 2013, MARC expects dividend payouts to be at levels which would allow Sports Toto to preserve prudent levels of cash.

The stable rating outlook takes into consideration MARC’s expectations that the company’s credit profile will remain in line with the current rating band.

Contacts:
Darrell Lim, +603-2082 2261/ darrell@marc.com.my ;
Rajan Paramesran, +603-2082 2233/ rajan@marc.com.my .

RAM Ratings reaffirms rating of Anjung Bahasa’s debt issue with stable outlook

Published on 29 July 2011

RAM Ratings has reaffirmed the long-term rating of AA1 for Anjung Bahasa Sdn Bhd’s (Anjung or the Company) RM110 million Junior Notes with a stable outlook.



Anjung is a concession company that has the exclusive right to collect monthly payments as well as maintenance and management (M&M) fees from the Government of Malaysia (GOM), for the construction and operation of Menara Dewan Bahasa dan Pustaka. During the period under review, payments from the GOM had been prompt and in accordance with the Privatisation Agreement (PA). In addition, Anjung had managed and maintained the building without any major problems.

The ratings reflect the assured and stable monthly payments and M&M fees from the GOM, as stipulated under the PA. Other supporting factors include the tight transaction structure and restrictive covenants which mitigate any cashflow leakages; minimal counterparty risk vis-à-vis the GOM; low operations risk given that the scope of work is straightforward and not complex; predictability of cashflow as inflows are dictated by the PA while operating costs are minimal and largely fixed under the M&M agreement; and the assignment of Anjung’s rights under the PA (including revenue rights) to the noteholders. Under our stressed-case scenario, Anjung is envisaged to record annual finance service cover ratio of between 1.21 and 1.49 times over the same period. This is within the minimum requirement of 1.20 times under the Trust Deed.

Nevertheless, the risk of early PA termination due to default on the part of Anjung has not been fully eliminated. Given the Company’s minimal performance obligations under the PA, however, the probability of such an event is deemed low.

Media contact
Yong Keck Phin
(603) 7628 1183
keckphin@ram.com.my

MARC PLACES RADICARE SDN BHD'S RM100 MILLION CP/MTN AND RM50 MILLION MTN FACILITIES ON MARCWATCH NEGATIVE

Jul 28, 2011 -
MARC has placed Radicare Sdn Bhd’s (Radicare) issue ratings of MARC-1/A+ on its RM100 million CP/MTN facilities and A+ on its RM50 million MTN facility on MARCWatch Negative due to the increased uncertainty regarding the renewal of Radicare’s hospital support services concession which expires on October 28, 2011. The last rating action was taken on December 16, 2010 to affirm the ratings and to revise the rating outlook to developing from stable in light of the uncertainty surrounding the government’s decision on the concession renewal.

Radicare has the exclusive right to provide non-clinical support services to 41 government hospitals and six medical institutions through a 15-year concession awarded by the government in October 1996. Under the terms of the concession agreement (CA), the government is obliged to make a decision on the renewal of the concession a year before the expiry of the CA. However, MARC understands that to date, the concession renewal is still under review by the authorities.

The current issue ratings of Radicare reflect the assumption that Radicare’s hospital support services concession with the government will be renewed before expiry. Non-renewal of the concession could result in rating changes for the rated facilities given that Radicare generates more than 90% of its revenue through the concession.

Moderating the direct credit impact of the delay or non-renewal risk are the amounts held in designated accounts of RM13.5 million and RM17 million under the MTN and CP/MTN facilities respectively which provide slightly over 75% cover of the outstanding RM20 million under the two rated facilities as of July 12, 2011. The company has cash and cash equivalents (excluding amounts in designated accounts) of RM92.3 million as of April 30, 2011 that should provide some additional liquidity to meet its obligations under the MTN and CP/MTN facilities which will mature in November 13, 2012 and November 28, 2012 respectively.

MARC will closely monitor developments on the renewal of Radicare’s CA and will take appropriate rating action upon the expiry or renewal of the CA, whichever is earlier.

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

RAM Ratings reaffirms Silver Bird's ratings, maintains negative outlook

Published on 22 July 2011

RAM Ratings has reaffirmed the A2 rating of Silver Bird Group Berhad’s (SBGB or the Group) RM70 million Serial Bonds (2005/2012), as well as the A2/P2 ratings of its RM30 million Commercial Papers/Medium-Term Notes Programme (2005/2012). Meanwhile, the negative outlook on the long-term ratings has been maintained. The reaffirmed ratings reflect SBGB’s market position as the second-largest player in the domestic premium-bread market, stable demand for its products, its extensive distribution network and improved financial profile.



In FYE 31 October 2010 (FY Oct 2010), SBGB’s operating profit before depreciation, interest and tax climbed up 13.1% year-on-year to RM31.89 million, led by the better showing of its consumer-food division, which produces the High 5 and Silver Bird brands. The division’s sales had increased after having serviced more outlets. Meanwhile, following private share placements and related warrant conversions, SBGB managed to lighten its debt load by 13% to RM141.44 million as at end-FY Oct 2010, using the cash proceeds from these exercises. Coupled with its enlarged shareholders’ funds, its adjusted gearing ratio eased to 0.94 times (end-FY Oct 2009: 1.54 times). Given its lower debt level and – to a smaller extent – better profitability, SBGB’s adjusted funds from operations debt cover (FFODC) strengthened from 0.20 to 0.26 times.

Considering the growth potential of its operations, the Group’s FFODC is expected to range around 0.25-0.3 times over the next 2 years. Given its planned capital expenditure of around RM35 million to expand the production capacity of its core operations, its adjusted gearing ratio is expected to stay at around 0.9 times over the same span. On 15 June 2011, SBGB entered into a Shareholders’ Agreement with KPF Holdings Sdn Bhd, a wholly owned subsidiary of Koperasi Permodalan Felda Malaysia Berhad (FELDA), under which the Group will be involved in the distribution of agriculture-based food and the manufacture of dairy products. We caution that if this venture entails higher-than-expected capital expenditure/working capital, SBGB’s financial profile may worsen.

Meanwhile, SBGB’s shrinking market share remains a concern. Although SBGB’s sales volume has been increasing, Gardenia Bakeries (KL) Sdn Bhd’s (Gardenia Malaysia) has been advancing faster, driven by its capacity expansion. The Group’s growth may have also been impeded by allegations of non-compliance with certain regulations more than 4 years ago which had eventually been dismissed. While the decline in SBGB's market share was halted in FY Oct 2010, it remains to be seen if it can improve its market share. The Group’s credit profile is also constrained by the gradual removal of subsidies on core inputs that may affect its margins, the more competitive landscape of the bread-manufacturing business, and its loss-making operations in Singapore.

“While SBGB has been able to improve its financial metrics and halt the decline in its market share, we have maintained the negative rating outlook to reflect our concerns over its future ability to expand its market share. SBGB’s ability to preserve its margins is also a concern as the upward price revisions for its consumer foods (in June 2011) may not sufficiently offset rising input costs. In addition, the Group may be exposed to new risks arising from its agreement with FELDA,” observes Kevin Lim, RAM Ratings’ Head of Consumer and Industrial Ratings.

The ratings may be downgraded if SBGB’s market share and profitability deteriorate further, or if it faces more operational risks from its new ventures (which would affect its financial profile). On the other hand, the rating outlook may be revised to stable if SBGB is able to improve its market share, sustain its healthier margins and adequately address the risks from its new business foray.

Media contact
Low Pui San
(603) 7628 1051
puisan@ram.com.my

MARC AFFIRMS ITS MARC-1ID/AAAID RATINGS ON UMW HOLDINGS BERHAD'S ISLAMIC DEBT PROGRAMMES

Jul 19, 2011 -
MARC affirmed its short-term and long-term Islamic debt ratings of MARC-1ID/AAAID on UMW Holdings Berhad (UMW) and maintained its stable outlook on the ratings. The rating actions affect RM610 million of outstanding notes issued under the investment holding company's RM300 million Islamic Commercial Paper/Islamic Medium Term Notes (ICP/IMTN) Programme and RM500 million Islamic Medium Term Notes (IMTN) Programme.



The affirmed ratings reflect improvement in the government-linked company's consolidated operating performance and the strong business positions of 51% owned subsidiary UMW Toyota Motor Sdn Bhd and 38% owned associate Perusahaan Otomobil Kedua Sdn Bhd in the domestic automotive market. Its substantial ownership by government-led investment agencies, in particular Skim Amanah Saham Bumiputera, Employees Provident Fund Board and Permodalan Nasional Bhd continues to be an important rating consideration. These factors are partially offset by cyclical variations in the domestic automotive sector, the weak results of its oil and gas (O&G) segment and the risks associated with possibly more acquisitions in the future and the group's international expansion in a highly competitive business environment.

UMW's portfolio of businesses includes automobile assembly and manufacturing, equipment, manufacturing and engineering (M&E), and O&G with operations in 13 countries largely within the Asia Pacific region. Of the four core segments, its automotive segment has historically provided the majority of revenue and earnings. The automotive segment accounted for 77.5% of consolidated revenue and nearly all of consolidated pre-tax profit in 2010. MARC notes the continuing market leading positions of its Toyota and Perodua marques in the non-national and national market segments, which collectively accounted for 46.3% of the total industry sales volume for the previous two consecutive years. The automotive segment encountered parts shortages from the March 2011 earthquake and tsunami in Japan, however, production has returned to normal since May 26, 2011 and the impact of the supply chain disruption on sales should be moderated by the launch of the new MYVI on June 16, 2011 and planned ramp up in production for the remaining months of the year.

UMW's financial results for the year ended December 31, 2010 were generally in line with the rating agency’s expectations. Group revenue grew by 19.6% while pre-tax profit rose 55.1% year-over-year compared to declines of 16.0% and 33.7% respectively in 2009. Overall, the group's results had benefited from foreign currency movements and improved trading conditions. With the exception of O&G, UMW's portfolios of businesses were profitable in 2010 and two of four segments, automotive and M&E, posted higher operating margins. O&G incurred a segment pre-tax loss of RM180.4 million for the year, including a RM63.7 million share of losses of equity-accounted investments. Results of the O&G business in 2010 were constrained by challenging industry conditions in addition to trade protection measures introduced by the United States. However, improvement in this segment is possible in 2011 with an expected turnaround in the consolidated operating performance of its O&G subsidiaries and improved equity-accounted results of WSP Holdings Limited (WSP). The 22.3% owned WSP manufactures pipes and other tubular products used in O&G exploration and production (E&P). In addition to full year revenue contributions from its Naga 2 offshore rig, the E&P sub segment will also see contributions from Naga 3 which was commissioned in March 2011.

At holding company level, revenue and pre-tax profit showed increases of 49.0% and 63.4% year-on-year, primarily the result of higher dividends received. Dividends received during the year of RM373.3 million was more than sufficient to cover interest payments of RM16.4 million and dividends to shareholders of RM273.6 million. MARC notes a slight increase in the holding company’s leverage, measured at 0.47 times (x) debt/shareholders' funds from 0.43x a year earlier. Holding company liquidity has been bolstered by a decrease in amounts due from subsidiaries and higher dividends received; UMW held cash and cash equivalents of RM237.7 million as at end-2010 (end-2009: RM5.4 million).

The stable outlook reflects an improved operating environment for most of the group's businesses, and expected recovery in its O&G segment. It also assumes that holding company liquidity and cash flow metrics will remain supportive of the assigned ratings. A material deterioration in UMW's consolidated financial performance, adverse developments in relation to any of its significant investments, a significant increase in its financial leverage or tightening of its liquidity could exert pressure on the ratings.

Contacts:
Sabesh Parameswaran, +603-2082 2260/ sabesh@marc.com.my;
Mac Lai Yew Weng, +603-2082 2280/ lyweng@marc.com.my;
Francis Xaviour Joe, +603-2082 2279/ fxjoe@marc.com.my.

Eurozone agrees new 109bn euros Greek bailout

Leaders of the Eurozone countries have agreed a new bailout package for Greece worth 109bn euros ($155bn, £96.3bn).



For the first time, private lenders, including banks, are also pledging support which will give Greece easier repayment terms.

FULL REPORT PLEASE VISIT THIS BBC LINK BY CLICKING ON THIS

RAM Ratings reaffirms Penang Bridge's AA2 debt ratings

Published on 21 July 2011
RAM Ratings has reaffirmed the AA2 ratings of Penang Bridge Sdn Bhd’s (PBSB or the Company) RM785 million Al-Bai’ Bithaman Ajil Facility (2000/2013) (BaIDS) and RM695 million Redeemable Zero-Coupon Serial Sukuk Istisna’ (2006/2019) (Sukuk) – collectively known as “the Facilities”; both long-term ratings have a stable outlook. PBSB, a single-purpose company, is the concessionaire for the 13.5-km Penang Bridge (the Bridge).

Supported by its monopolistic nature as the sole road link between Penang island and the mainland, the Bridge has been charting stable traffic-volume growth, with a compounded annual growth rate of 2.75% between 2001 and 2009. In 2010, traffic volume increased 10.22% to 25.44 million passenger-car units (PCU) (2009: 23.08 million PCU). The trend carried through the first 5 months of 2011, with a 5.78% year-on-year rise to 10.85 million PCU. The impressive performance is attributable to Penang’s rejuvenated economy and also traffic migration from the Penang ferry service to the Bridge following the opening of its third lane in August 2009, thereby expanding its capacity and easing congestion.

Meanwhile, the management expects the opening of the Second Penang Bridge (Second Bridge) - expected by 4Q 2013 - to reduce the Bridge’s traffic volume by about 16%. Nonetheless, it is difficult to gauge the exact traffic patterns. We, however, opine that the existing bridge is likely to remain the principal road link between the mainland and the island of Penang given its more strategic alignment.

RAM Ratings’ cashflow analysis assumes a 20% reduction in the Bridge’s traffic volume upon the completion of the Second Bridge. Under this scenario, PBSB is still projected to register strong minimum and average finance service cover ratios (with cash balances, post-distribution, calculated on principal repayment dates) of 2.49 times and 2.93 times, respectively, throughout the tenures of the Facilities. Nonetheless, we caution that a greater-than-expected reduction in traffic volume for the Bridge will affect the Company’s debt-coverage levels, thus exerting downward pressure on the Sukuk’s rating.

Notably, PBSB has not declared or paid any dividend since fiscal 2001, as the management is mindful about adhering to the stringent financial covenants on a forward-looking basis. Under this scenario, RAM Ratings assumes that there will be no distributions to shareholders throughout the tenures of the Facilities.

In the meantime, the ratings remain moderated by single-project and regulatory risks. Given that PBSB derives its income from a specific project, a force majeure event could disrupt its entire operations, without any alternative source of cashflow to meet the Company’s debt-servicing obligations. On the other hand, Penang Bridge has never been allowed any toll-rate revisions, although cash compensations have been forthcoming to date.

Media contact
Michael Ti
(603) 7628 1015
michael@ram.com.my

EU bank stress test results due

The European Banking Authority (EBA) is set to publish the results of stress tests of 90 banks across Europe later.



The tests are designed as a financial healthcheck and aim to ensure banks have sufficient capital to withstand difficult economic scenarios.


Some say the tests are not strict enough, despite changes made after only seven out of 91 banks failed last year.

On Wednesday, German bank Helaba said it expected to pull out of the stress tests to avoid public failure.

See original article =>
http://www.bbc.co.uk/news/business-14159217

Moody's to review US triple-A debt rating

Ratings agency Moody's has said it may cut the US AAA debt rating, citing the "rising possibility" the US will default on its debt obligations.



The agency warned the likelihood the US would fail to raise its statutory debt limit in time to avert default was low but not insignificant.



It came as a fourth day of cross-party talks in Washington on the debt limit were said to have ended stormily.

President Barack Obama reportedly told a top Republican: "Enough is enough."


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