Tuesday October 9, 2012
MARC affirms KMCOB debt, revises outlook to negative
PETALING JAYA: Malaysian Rating Corp Bhd (MARC) has affirmed its rating on KMCOB Capital Bhd's (KMCOB) RM343.1mil sukuk murabahah medium term notes programme of A+IS (CG) and revised its rating outlook to negative from stable.
KMCOB is the funding vehicle of the Scomi Oilfield Ltd (SOL) group. The sukuk benefits from corporate guarantee from Scomi Oiltools Bermuda Ltd (Scomi Oiltools), the present immediate holding company of Scomi's oilfield services subsidiaries and a 76.08%-owned direct subsidiary of Scomi Group Bhd (Scomi).
Accordingly, the rating is primarily driven by SOL's consolidated credit profile.
MARC said in a statement that the outlook revision reflected the delay in SOL's disposal of its West African assets, the proceeds of which were earmarked for the redemption of its 2018 sukuk tranche amounting to RM90mil.
SOL was initially required to complete its disposal of its West African assets and deposit the proceeds into the Finance Service Reserve Account on or before Dec 31, 2012. While the sukukholders have granted KMCOB indulgence until Dec 31, 2013 to complete the divestment, a consequence of the delay will be a slower-than-expected pace of deleveraging on the part of SOL. The group's consolidated debt-to-equity ratio was high at 1.72 times (x) as at end-March 2012.
Additionally, SOL's potentially increasing working capital needs in respect of new contracts could limit its ability to use internal operating cash flow to pare its debt.
MARC said the affirmed rating also took into account the announced reorganisation of intermediate holding company SOL and the proposed acquisition of the reconstituted SOL group from Scomi by Scomi Marine Bhd (SMB).
Following the completion of the proposals, expected by the fourth quarter of this year, SOL's resulting financial profile and business prospects were expected to be stronger.
On Scomi's disposal of SOL to SMB, MARC believes that the planned divestment would help reduce event risk at the Scomi company level stemming from a put option given to the minority shareholder of SOL.