MARC has downgraded its ratings on Nam Fatt Corporation Berhad’s (Nam Fatt) RM250 million Islamic Commercial Paper/Islamic Medium Term Notes Programme (ICP/IMTN) to MARC-4ID/CID from MARC-3ID/BBB+ID. The ratings continue to be placed on MARCWatch Negative where it has been placed since December 30, 2009. 

The rating action was taken following Nam Fatt’s failure to meet its principal and interest payment of about RM13.2 million to Bank Kerjasama Rakyat Malaysia Berhad on March 15, 2010. The bank loan default is likely to trigger an immediate demand for repayment on all its other credit facilities though MARC has yet to receive a notice from the trustee that Nam Fatt’s ICPs have experienced an event of default. Additionally, the trustee has yet to declare an acceleration of maturity.

Nam Fatt has outstanding ICPs of RM130 million, of which RM40 million and RM90 million were specifically used to fund the Syarikat Perumahan Nasional Berhad’s (SPNB) low- to-medium cost housing project in Tumpat, Kelantan and Thailand’s National Housing Authority’s low-cost apartment project in Bangkok respectively. Of the outstanding ICPs, RM80 million is due on April 6, 2010.

MARC notes that the directors of Nam Fatt have announced that the company will not be able to pay all its debt as and when they fall due in the next 12 months beginning from March 15, 2010. Accordingly, MARC does not expect Nam Fatt to be able to satisfy its obligations in the event an immediate demand for repayment on all its other credit facilities, including the ICPs, is made.

The MARCWatch Negative placement highlights Nam Fatt’s intention to restructure its debt and the likelihood that the ratings will be lowered to ‘D’ upon immediate demand for repayment of the ICPs or upon Nam Fatt’s failure to roll over its maturing ICPs on April 6, 2010, whichever is earlier.

Contacts:
Rajan Paramesran, 03-2090 2233/ rajan@marc.com.my;
Jason Kok, 03-2090 2258/ jason@marc.com.my