MARC has lowered its ratings on Paradym Resources Industries Sdn Bhd’s (“PRI”) RM40 million Islamic Commercial Papers / Medium Term Notes Issuance Programme (“ICP/MTN”) to CID /MARC-4ID from AID /MARC-2ID. The ratings remain on MARCWatch Negative. The downgrades reflect MARC’s concerns as to the company’s ability to fund near-term commitments arising from the termination of a contract to supply raw materials by Bank Negara Malaysia (“BNM”). The termination of the Contract (“BNM Contract”) between PRI and BNM which is expected to reduce PRI’s revenue by more than 60% constitutes an Event of Default under the terms of the facility.

PRI is a manufacturer of copper rods, wires and strips. On 30 January 2004, PRI and BNM entered into an Agreement for the Purchase of Raw Materials for the production of metal coin strips. PRI had also entered into a 10-year agreement on 9 March 2004 with The Royal Mint of Malaysia Sdn Bhd (“RMM”), the sole official minter for circulation coins in Malaysia, for the supply of Cupro-Nickel 25 (“CuNi”) strips (“CuNi Contract”). RMM became a wholly owned subsidiary of PRI in March 2006.

Termination of BNM Contract will reduce PRI’s revenue by approximately 60%

The termination of the BNM Contract has resulted in PRI not being able to supply CuNi strips to RMM under the 10 year CuNi Contract. PRI’s management has represented that the contract had been contributing about 60% of PRI’s revenue. The business and financial profiles of PRI will be seriously compromised by the loss of the BNM Contract.

Serious doubts over PRI’s ability to meet its obligations for the ICP/MTN

Stress tests conducted on PRI’s existing cash flow projections indicate that negative cash flows will become evident in the current financial year leading to concerns over the company’s ability to meet its obligations under the ICP/MTN facility. PRI is required to maintain a minimum FSCR of 1.5 times.

An Event of Default may cause a working capital crunch and impact its existing copper rods and wire business

The termination of the BNM Contract is an Event of Default under the facility terms. The Event of Default may result in cross defaults on PRI’s credit facilities with other financial institutions.

Short term liquidity constraints

PRI’s most recent profit payment in connection with the rollover of its RM40 million CP on May 14, 2007 was funded by a drawdown on its Finance Service Reserve Account (“FSRA”) balance. PRI has failed to replenish the shortfall in the FSRA within the 14-day remedy period. The next rollover of its CP will be on June 14, 2007. PRI is also obligated to transfer RM5 million progressively into the Principal Service Account (“PPSA”) for a scheduled programme limit reduction on July 16, 2007. Failure to meet either of these commitments will result in a downgrade of the ratings to ‘DID’.