Tuesday December 14, 2010
Matang’s sukuk on MARCWatch Negative
MARC said in a statement the rating action reflected concern about Matang's ability to adequately meet the May 2011 redemption of its remaining RM15mil outstanding sukuk. Matang is a wholly-owned single-purpose funding vehicle of Zecon Bhd.
Its payment obligations under the fully-amortising sukuk are primarily funded by progress payments collected from Jabatan Kerja Raya Sarawak under a turnkey contract to construct a highway linking Kuching City to Sarawak's new Federal Administrative Centre (Matang route project).
Matang needs additional liquidity of RM1.898mil to meet the portion of its upcoming payment obligations under the sukuk which are currently not covered by existing balances in designated accounts. The construction progress on the second and final phase of the Matang route project continues to be substantially behind schedule, MARC said.
MARC said it understood that Zecon was currently negotiating a RM31.4mil debt restructuring.
Given Zecon's own financial difficulties, MARC regards the likelihood of sufficient and timely financial support from Zecon as uncertain, it said.
MARC said the rating would be lowered should Matang not meet the revised scheduled payments into the sinking fund account (SFA) by Dec 19.
Conversely, if it's SFA and finance service reserve account balances are sufficient to fully fund the final redemption of the sukuk by February 2011, MARC will remove Matang's rating from MARCWatch Negative.