ECB head says Chinese help for eurozone is 'normal'

The outgoing ECB president, Jean-Claude Trichet, has said that it is "absolutely normal" for the European rescue fund to try to find more money
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Global Economy

The president of the European Central Bank has denied that eurozone countries are going "cap in hand" to China.

On the eve of his departure from the ECB's top job, Jean-Claude Trichet said the move was "absolutely normal".

The head of the European Financial Stability Facility (EFSF) has been meeting Chinese officials in an effort to boost the bailout fund.

Mr Trichet hands over the reins of the ECB to the Italian central banker, Mario Draghi, on Tuesday.

SEE BBC NEWS; http://www.bbc.co.uk/news/business-15516697

Nicolas Sarkozy: Greece should have been denied euro

French President Nicolas Sarkozy has said allowing Greece into the eurozone in 2001 was a "mistake".

He said Greece was "not ready" at the time. But, he added, it could be rescued thanks to Wednesday's EU deal on the euro debt crisis.

In response, Greece's foreign minister told the BBC that Athens was not the source of the crisis, and that no country should be made a scapegoat.

The agreement reached in Brussels has triggered a worldwide shares rally.

SEE BBC NEWS: http://www.bbc.co.uk/news/world-europe-15487269

MARC DOWNGRADES ISSUE RATINGS OF SCOMI GROUP BERHAD AND KMCOB CAPITAL BERHAD

Oct 4, 2011 -
MARC has taken the following actions on issue ratings of Scomi Group Berhad (Scomi) and funding vehicle KMCOB Capital Berhad (KMCOB) after removing the same from MARCWatch Negative:
1) Lowered its issue rating on Scomi's RM500 million Medium Term Notes (MTN) Programme to A+ from AA-; and
2) Lowered its issue rating on KMCOB's RM630 million Murabahah Medium Term Notes to A+ID(cg) from AA-ID(cg).

Scomi is the ultimate parent of KMCOB which is held through 76%-owned operating subsidiary Scomi Oilfield Limited (SOL). KMCOB's obligations under the rated notes are guaranteed by SOL.

The outlook on both ratings is negative. The downgrades affect RM200 million of outstanding MTNs issued by Scomi and RM480 million of outstanding Murabahah notes issued by KMCOB.

The one-notch downgrades balance low operating cash flow at Scomi and SOL relative to maturing debt obligations and tight liquidity at both entities against the recent improvement in the group's core business operations. KMCOB's noteholders recently consented to a further deferment of outstanding payments into its Finance Service Reserve Account (FSRA) to December 14, 2011.
Scomi, meanwhile, intends to unlock liquidity through asset disposals and/or corporate exercise(s) to reduce its debt leverage. MARC opines that there is a possibility that Scomi may also seek a waiver or deferment of its forthcoming sinking fund requirements in view of the short remaining time frame to build up the sinking fund by March 2012 to redeem the RM200 million outstanding notes due in September 2012.

In MARC's view, the current liquidity metrics of SOL (in the case of KMCOB) and Scomi reveal a degree of vulnerability to execution risk and less favourable than expected operating performance that are better indicated by the revised ratings and negative outlook. Although MARC believes that there is a possibility that the group can improve its operating cash flows in the second half of 2011 on the back of improved market conditions, the rating agency believes that noteholders of KMCOB and Scomi face increased risk of a non-coercive debt rescheduling in coming months.
Oilfield services provider SOL turned around with a pre-tax profit of USD12.5 million for the six months ended June 30, 2011 (1HFY2011) after two consecutive years of losses. Its order book also shows healthy replenishment with the uptick in drilling activity, particularly in Malaysia. At group level, Scomi posted an unaudited pre-tax profit of RM47.7 million for 1HFY2011 compared to a full year pre-tax loss of RM186.6 million for FY2010.

MARC will likely lower the ratings further if SOL and Scomi are unable to secure additional liquidity resources through asset disposals or other external sources and/or internally generated cash flow comfortably ahead of payment dates for forthcoming rated debt obligations. The downgrades would not necessarily be limited to one notch, particularly for Scomi, whose debt obligations are structurally subordinated to that of its operating subsidiaries, including SOL's. The rating agency will likely view any further solicitations of covenant and sinking fund build-up payment waivers by KMCOB and/or Scomi negatively. Conversely, the outlook can be changed to stable if SOL and Scomi are able to secure additional liquidity resources to pay down debt in accordance with existing debt maturity schedules.

Contacts:
Gary Lim Chun Pin, +603-2082 2243 / cplim@marc.com.my;
Francis Xaviour Joe, +603-2082 2279 / fxjoe@marc.com.my.

RAM Ratings reaffirms AA1 rating of Ranhill Powertron's Islamic MTN programme

Published on 04 October 2011
RAM Ratings has reaffirmed the AA1 rating of Ranhill Powertron Sdn Bhd’s (“Ranhill Powertron” or “the Company”) RM540 million Islamic Medium-Term Notes Programme, with a stable outlook. Ranhill Powertron is an independent power producer (“IPP”) that operates a 190-MW combined-cycle, gas-turbine power plant in Kota Kinabalu, Sabah, under a 21-year power purchase agreement (“PPA”) with Sabah Electricity Sdn Bhd (“SESB”).

Ranhill Powertron has managed to preserve its commendable operating track record, healthy financial profile and strong debt-servicing ability on the back of stringent financial covenants. The Company has been claiming full capacity payments from SESB since the commissioning of the original open-cycle, gas-turbine phase in 1998, by having consistently met the requirements under the PPA. It also earned a modest fuel margin in the 12-month period between July 2010 and July 2011, despite having registered higher-than-allowed heat-rate levels for 3 months.

Going forward, Ranhill Powertron is envisaged to generate respective minimum and average finance service coverage ratios (“FSCRs”) (with cash balances, post-distribution) of 1.79 times and 1.94 times on principal repayment dates. In assessing the Company’s ongoing annual distributions to its shareholders, our assumptions are in line with the management’s assertion that Ranhill Powertron will adhere to its financial covenants throughout the debt programme’s tenure (i.e. on a forward-looking basis, as opposed to only the year of assessment). Meanwhile, similar to other IPPs, Ranhill Powertron is also exposed to regulatory and single-project risks.

Media contact
Lawrence Leong
(603) 7628 1187
lawrence@ram.com.my

European Union reaches key agreement on Greek debt

The European Union has reached a "three-pronged" agreement it says is vital to resolving the Greek debt crisis.

As part of the deal, banks have agreed to take a 50% loss on Greek debt.

That has removed a major obstacle in European efforts to stabilise the problem.

The announcement helped lift the euro as investors were more optimistic about the outlook for the region's growth and single currency.

"The result will relieve the whole world that was expecting a decision that was strong from the eurozone," French President Nicolas Sarkozy said at a press conference in Brussels.

SEE BBC: European Union reaches key agreement on Greek debt

MARC DOWNGRADES DAWAMA SDN BHD'S SENIOR SUKUK RATING TO 'D'

Oct 3, 2011 -
MARC has lowered its rating on Dawama Sdn Bhd's (Dawama) RM120.0 million Sukuk Musyarakah Medium Term Notes Programme (Senior Sukuk) to 'D' from 'CIS' to reflect the missed principal repayment of RM20.0 million on September 27, 2011. MARC understands from the trustee that no payment was made on the date. The RM20.0 million principal repayment had been rescheduled from April 27, 2011 after Senior Sukukholders consented to a deferment of the same.

MARC had earlier downgraded the RM20.0 million Junior Sukuk to ‘D’ on April 29, 2011 following a missed profit payment due on April 27,2011. Following its current rating action, MARC will accordingly cease to provide analytical coverage on Dawama.

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

RAM Ratings assigns AA2 and AA3 ratings to RHB Bank's Proposed RM3 billion multi-currency debt programme

Published on 03 October 2011
RAM Ratings has reaffirmed RHB Bank Berhad’s (RHB Bank or the Bank) respective long- and short-term financial institution ratings at AA2 and P1; the Bank’s issue ratings (refer to Table 1) have also been reaffirmed. At the same time, RAM Ratings has assigned respective AA2 and AA3 ratings to the Bank’s Proposed Senior Notes and Proposed Subordinated Notes under its Proposed RM3 billion Multi-Currency Medium-Term Note (Proposed MCMTN) Programme. The proceeds from the Proposed MCMTN Programme have been earmarked for general working capital, other corporate purposes and any repayment of borrowings. The Proposed Subordinated Notes qualify as the Bank’s Tier-2 capital under Bank Negara Malaysia’s capital-adequacy regulations. All the long-term ratings have a stable outlook.

The 1-notch rating differential between RHB Bank’s AA2 long-term financial institution rating and the AA3 ratings of its Subordinated Notes reflects the subordination of the debt facilities to its senior unsecured obligations. The 2-notch rating differential between RHB Bank’s AA2 long-term financial institution rating and the A1 rating of its Hybrid Tier-1 Securities indicates the deeply subordinated nature and embedded interest-deferral feature of the hybrid instruments.

RHB Bank is the core entity within the RHB Capital Berhad universal-banking group (RHB Capital or the Group). The financial institution ratings reflect RHB Bank’s established market position in Malaysia, along with its healthy profitability and adequate capitalisation levels.

In fiscal 2010, RHB Bank had achieved record results against the backdrop of a conducive domestic economy and synergistic benefits derived from other entities within the Group. The upward trend continued in 1H FY Dec 2011 with an 11% y-o-y pre-tax profit growth to RM1.0 billion (1H FY Dec 2010: RM928.1 million). The Bank’s gross impaired-loan ratio had also improved further to 3.9% at end-June 2011 (end-December 2010: 4.4%) supported by lower net impaired loans formation as well as an enlarged loan base. Its net loans-to-deposits ratio remained sound at 88.3% at end-June 2011 (end-December 2010: 88.2%). At the same time, capitalisation levels remained adequate, with its Tier-1 and overall risk-weighted capital-adequacy ratios (RWCARs) coming in at 10.3% and 14.0%, respectively (end-December 2010: 10.0% and 13.9%).

In respect of RHB Bank’s proposed acquisition of an 80%-stake in an Indonesian Bank, PT Bank Mestika Dharma, we understand that its acquisition plan is currently under review due to the uncertainty arising from potential regulatory change on the single shareholding limit in Indonesian banks.

RAM Ratings notes that the Group had experienced changes in its key management line-up during the year, as well as changes in the composition of its significant shareholders. We do not expect them to materially affect RHB Bank’s direction and focus; however, we will maintain close monitoring of any potential impact on the momentum of strategy implementation within the Group.

Media contact
Gladys Chua
(603) 7628 1049
gladys@ram.com.my

MAA Holdings redeems RM140 million bank-guaranteed MTN; outlook on CP/MTN Programme revised from negative to stable

Published on 30 September 2011
RAM Ratings has received confirmation from the facility agent that MAA Holdings Berhad (MAA Holdings) has fully redeemed the outstanding RM140 million of medium-term notes (MTN) under its first RM200 million bank-guaranteed MTN issue (2007/2012) (the First Issue); this had been facilitated by the proceeds from the disposal of Malaysian Assurance Alliance Berhad and 4 other subsidiaries (the Identified Subsidiaries). We note that the early redemption had taken place before the scheduled maturity date of 6 January 2012. As such, RAM Ratings has withdrawn the AAA(bg) rating of the First Issue and no longer has any rating obligation on the debt facility.

Meanwhile, RAM Ratings has reaffirmed the respective long- and short-term ratings of MAA Holdings’ RM200 million Commercial Papers/Medium-Term Notes Programme (2007/2014), at B1 and NP. The outlook on the long-term rating has been revised from negative to stable following the completion of the sale of the Identified Subsidiaries.

Media contact
Shireen Ng
(603) 7628 1021
shireen@ram.com.my

MARC WITHDRAWS RATING ON DRIR MANAGEMENT SDN BHD'S CLASS A SUKUK; CLASS B SUKUK REMAINS ON MARCWATCH DEVELOPING

Sep 30, 2011 -
MARC has withdrawn its AAIS rating on DRIR Management Sdn Bhd’s (DRIRM) Senior Class A Sukuk Ijarah Medium Term Notes (Sukuk) following the full redemption of the remaining outstanding RM40 million principal amount of Sukuk on June 28, 2011. MARC’s AA-IS rating on DRIRM’s RM160 million Class B Sukuk remains on MARCWatch Developing pending the completion of the proposed refinancing of the Sukuk.

MARC will closely monitor the progress of the refinancing exercise, which is now at an advanced stage and is expected to be completed within the next three months, to resolve the MARCWatch placement.

Contact:
Sandeep Bhattacharya, +603-2082 2247/ sandeep@marc.com.my.

RAM Ratings reaffirms Toyota Capital Malaysia's debt ratings, maintains negative outlook

Published on 30 September 2011
RAM Ratings has reaffirmed the AAA(s)/P1(s) ratings of Toyota Capital Malaysia Sdn Bhd’s (“Toyota Capital” or “the Company”) RM1 billion Islamic Commercial Papers/Medium-Term Notes (“CP/MTN”) Programme (2008/2015). At the same time, the AAA(s) ratings of Toyota Capital’s RM1.2 billion MTN Programme (2008/2018) and the P1(s) rating of the Company’s RM600 million CP Programme (2004/2011) have been reaffirmed. All the long-term ratings have a negative outlook.

The enhanced ratings of Toyota Capital’s MTN and CP Programmes reflect the credit strength of the irrevocable and unconditional guarantee extended by Toyota Motor Finance (Netherlands) BV (“Toyota Netherlands”), a fully owned subsidiary of Toyota Financial Services Corporation (“Toyota Financial Services”). RAM Ratings notes that Toyota Netherlands has a credit-support agreement with Toyota Financial Services; in turn, Toyota Financial Services has a similar contract with Toyota Motor Corporation of Japan (“Toyota Motor” or “the Group”). Hence, the ultimate support from Toyota Motor enhances the credit profiles of these conventional debt facilities beyond Toyota Capital’s stand-alone credit strength.
Similarly, the ratings of the Islamic CP/MTN Programme are underpinned by a Purchase Undertaking from Toyota Capital, which is in turn backed by the irrevocable and unconditional guarantee extended by Toyota Netherlands, with the ultimate credit support stemming from Toyota Motor.

Toyota Motor’s strong business profile is underscored by its position as one of the world’s largest vehicle manufacturers. The negative outlook reflects the Group’s still-vulnerable earnings prospects, which could be weakened further if recovery efforts were to slow down on the recent earthquake- and tsunami-driven devastation in Japan. The strong yen also exerts significant pressure on Toyota Motor’s earnings given its sizeable output from Japan. Furthermore, persistently high unemployment rates and still-uncertain economic outlook for key markets may affect the Group’s sales. On the other hand, these factors are moderated by the Group’s strong balance sheet. Should Toyota Motor be able to exhibit sustainable improvements in its earnings in the next few quarters, underpinned by its sturdy global positioning, the outlook on Toyota Capital’s long-term ratings could be reverted to stable. Otherwise, there may be downward pressure on the ratings of the debt instruments.

Toyota Capital, meanwhile, is a financier for primarily Toyota vehicles in Malaysia, and is ultimately owned by Toyota Motor; its goal is to complement and support the sale of Toyota vehicles in this country. The Company enjoys strong support and financial flexibility from its ultimate shareholder, Toyota Motor. Notably, Toyota Capital’s asset quality has remained sturdy, with a gross impaired-loan ratio of 0.6% as at end-March 2011. In FY Mar 2011, the Company achieved a record operating profit of RM38.1 million (FY Mar 2010: RM17.0 million), thanks to its more favourable financing business.

Media contact
Gladys Chua
(603) 7628 1049
gladys@ram.com.my