MARC, with immediate effect, is placing Ample Zone Berhad’s (AZB) RM150 million Sukuk Al-Ijarah (Sukuk) on MARCWatch with a developing outlook. Talam Corporation Berhad (TCB) had announced on 1 September 2006 that an event of default in payment of various bonds and banking facilites by TCB and its subsidiaries except for AZB had occurred. This has triggered a cross default as under AZB’s Sukuk Al-Ijarah structure, a default by one of the security party, i.e TCB has triggered  an event of default under the Sukuk Trust Deed.

Arising from the announcement, the Sukukholders held a meeting on 19 September 2006 and principally resolved they will not declare an event of default on AZB’s Sukuk. The decision was premised on the Sukuk being secured by the four properties (Menara Maxisegar, Wisma Talam, Midpoint Shopping Complex and Pandan Kapital Shopping Complex) and that the monthly rental collections from the said properties as well as funds in the Sukuk Profit Reserve Account (SPRA) (equivalent to 12 months profit on the Sukuk) collectively are sufficient to maintain the Sukuk’s debt obligations in the short term. In addition, the Sukukholders have also in principal agreed to the appointment of a monitoring agent to ensure that the rental collections and operating expenditure on the four properties are appropriately managed. MARC notes that as the next profit payment of RM6.1 million and the first partial redemption of RM2.5 million are due in January 2007, the appointment of the monitoring accountant is imperative. MARC also notes that the balances as at 19 September 2006 in the Collection Account & Sub-Lease Collection Accounts and SPRA amounting to RM0.9 million and RM12.7 million respectively are more than sufficient to cover for the profit and first Sukuk redemption due in January 2007.

MARC will continue to monitor the developments affecting AZB and disseminate any rating implications in due course.