Friday, Jan 27, 2006
The rating of Europlus Corporation Sdn Bhd’s (ECSB) RM350.0 million Murabahah Underwritten Notes Issuance Facility (MUNIF) has been downgraded from MARC-3ID to MARC-4ID and placed on MARCWatch with negative implications. The downgrade reflects substantial deterioration in ECSB’s internal cash flow generation, making it unlikely, in MARC’s opinion, that ECSB will be able to meet its financial obligations by June 2006 in relation to the MUNIF in the absence of asset sales and new financings. Currently, the Issuer expects to receive RM545.2 million from locked in sales. The receipt of these receivables is contingent upon the completion of development works to be done. The company has not been meeting its sinking fund account (SFA) payments and has sought noteholders’ indulgence and consideration to carry out a refinancing scheme. As at 31 December 2005, balances in the SFA stood at RM5.92 million as opposed to a minimum amount of RM119.75 million. Meanwhile the balances in the debt service reserve account (DSRA) as at the same date was at RM1.84 million. The outstanding facility balance, in the meantime, stands at RM196 million.
Europlus Corporation Sdn Bhd (ECSB) is a wholly-owned subsidiary company of Europlus Bhd (Europlus) which is a 99.99% subsidiary of Talam Corporation Berhad. Total secured sales from Bukit Beruntung I, II, and III, Lagoon Perdana, Kinrara Section 3 and Pulau Melaka projects have been earmarked as the source of repayment of this issue. In a series of meetings with the Issuer, MARC has been informed that progress of the projects assigned for the repayment of MUNIF has been stalled due to shortage of labour and building materials and termination of contractors.
The MARCWatch placement of the company rating reflects concerns that the balance in the DSRA will not be sufficient to cover monthly roll over profit beyond February 2006. Nevertheless, the Issuer expects to receive progress payments for works done to date amounting to RM4.78 million by end of January 2006 out of which RM2.5 million will be set aside to replenish the DSRA account. These monies (if materialised and received in time) will enable the Issuer to service the profits for the next four months. MARC will monitor ECSB’s progress in its restructuring efforts via debt refinancing in order to resolve the MARCWatch listing.
MARC’s assessment was completed based on the audited financial information for the year ending 31 January 2005. However, neither the latest management accounts nor the latest progress reports were made available to MARC through out the review period. MARC will continue to monitor the latest developments of ECSB and disseminate any subsequent rating implications, if any, in due course.
Europlus Corporation Sdn Bhd (ECSB) is a wholly-owned subsidiary company of Europlus Bhd (Europlus) which is a 99.99% subsidiary of Talam Corporation Berhad. Total secured sales from Bukit Beruntung I, II, and III, Lagoon Perdana, Kinrara Section 3 and Pulau Melaka projects have been earmarked as the source of repayment of this issue. In a series of meetings with the Issuer, MARC has been informed that progress of the projects assigned for the repayment of MUNIF has been stalled due to shortage of labour and building materials and termination of contractors.
The MARCWatch placement of the company rating reflects concerns that the balance in the DSRA will not be sufficient to cover monthly roll over profit beyond February 2006. Nevertheless, the Issuer expects to receive progress payments for works done to date amounting to RM4.78 million by end of January 2006 out of which RM2.5 million will be set aside to replenish the DSRA account. These monies (if materialised and received in time) will enable the Issuer to service the profits for the next four months. MARC will monitor ECSB’s progress in its restructuring efforts via debt refinancing in order to resolve the MARCWatch listing.
MARC’s assessment was completed based on the audited financial information for the year ending 31 January 2005. However, neither the latest management accounts nor the latest progress reports were made available to MARC through out the review period. MARC will continue to monitor the latest developments of ECSB and disseminate any subsequent rating implications, if any, in due course.