MARC has placed Stenta Films (M) Sdn Bhd’s (“Stenta”) RM90 million Murabahah Underwritten Notes Issuance Facility (“MUNIF”) on MARCWatch with a Negative Outlook. The action arises from Stenta’s intention to request for a further moratorium on principal repayment for another two years to September 2008 on the MUNIF facility thereby increasing refinancing risk, its exposure to the volatile pricing of petroleum based resins and concerns over the company’s ability to pass through the costs of these raw materials to customers.

Stenta, 70% owned by P.T.Argha Karya Prima Industry of Indonesia (AKPI) was incorporated in 1989 and commenced operations in January 1993. AKPI is one of the largest fully integrated flexible packaging material producers in Indonesia. It was listed on the Jakarta Stock Exchange in December 1992. The AKPI Group is one of the largest Biaxially Oriented Polypropylene (BOPP) films manufacturers in the Asia-Pacific region. Stenta is the leading domestic producer of BOPP films marketed under the brand name “ARLENE”. The films are widely used as packaging material for the food and tobacco industries.

The current request by Stenta stems from the company’s need to utilise existing funds for capital expenditure. Deferring principal repayments however, on top of an earlier deferral approved by note holders in 2005, will result in higher back end principal repayments thereby increasing the refinancing risk.

MARC will continue monitor the developments affecting Stenta.