Published: Thursday December 6, 2012 MYT 4:20:00 PM

Moody's changes Malaysia's MISC outlook back to stable

KUALA LUMPUR: Moody's Investors Service has changed the outlook for MISC Bhd back to stable from negative as it seeks to reduce its debt level.

The international ratings agency had on Thursday also affirmed the Baa2 issuer ratings on MISC and also the ratings on the US dollar denominated bonds issued by MISC Capital and guaranteed by MISC.

Moody's said the rating action followed MISC's decision to sell a 50% stake in its Gumusut-Kakap semi-floating production system to a unit of Petroliam Nasional Bhd (Petronas, A1/stable).

Petronas, a Malaysian government-owned oil company, is also the parent of MISC. Following the disposal of the 50% stake, MISC will receive US$1.7bil, of which it will use US$1.25bil to repay its borrowing. The remaining US$450mil will be used for capital expenditure and transaction expenses.

A Moody's vice president and senior analyst Vikas Halan said the debt repayment would help improve MISC's credit metrics, such that operating lease adjusted debt/EBITDA for 2012 and 2013 would be well within its tolerance level of 6.0 times for its ratings.

"The receipt of the proceeds will also lead to a significant improvement in MISC's liquidity profile. The decision by MISC to reduce its borrowings reflects its commitment to restoring its financial profile, which has suffered from a prolonged downturn in the shipping sector," he said.

He said although its outlook for the sector remains negative, and MISC would continue to face challenges at least until 2014, sale would place it on more solid ground to weather these challenges within its current rating.

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