Malaysian Merchant Marine Bhd’s (MMM) rating of AAID on its proposed RM120.0 million Al-Bai’ Bithaman Ajil Serial Bonds (BaIDS) reflects the Group’s proven track record in the highly competitive international shipping industry; its better than average financial profile; as well as a tight issue structure under which the charter proceeds of all its vessels will be assigned as security to the bondholders. Moderating factors include the inherent risks of the shipping industry, high capital requirements and price competitions.

Presently, the Group owns and operates a fleet of 12 vessels with a total carrying capacity of 202,587 dwt comprising two chemical tankers, two product tankers, three general cargo vessels, one dry bulk carrier, and four “Roll-On-Roll-Off” (RORO) car carriers. The Group’s revenue peaked in FYE August 2003 at RM104.7 million (FYE2002: RM81.34 million); contributed by RoRo, dry bulk carriage and tanker services. The increased revenue was mainly due to the larger volume of business activity generated from acquired new vessels as well as the increase in freight rates of time charter contracts especially for capsize vessels. Most of MMM’s vessels are currently chartered on a 6 to 48-month basis. A disproportionate increase in operating cost arising from the Group’s acquired new vessels as well as an extended period for drydock and repair works of a ship, squeezed operating margin to 19.1% in FYE2003.

With the advent of AFTA, the RoRo or vehicle carrier market is expected to expand, translating into increased demand for RoRo fleet space. The near to medium-term outlook for the intensely competitive dry bulk segment is equally positive, with freight rates improving and the promise of lucrative contracts for iron ore and coal transportation in Malaysia.

The BaIDS are secured by first fixed-charges over MMM Group’s vessels as well as assignment of charter proceeds. The redemption of secondary and primary bonds are accorded priority ranking under the issue structure; further enhancing the protection to bondholders.

Following the 33.8% increase in its debts in FYE2003 to RM152.85 million, MMM’s debt leverage scaled upwards to 1.13 times from 0.93 times recorded in the previous fiscal year. MMM’s debt-equity ratio is nevertheless, relatively low compared to that of its peers.