MARC has placed Tracoma Holdings Berhad’s (“Tracoma”) RM100 million Al Bai’ Bithaman Ajil Islamic Debt Securities (“BaIDS”) on MARCWatch with a Negative Outlook. This is premised on Tracoma’s delay (in accordance with the Terms and Conditions of the BaIDS) to deposit the monthly built up in the Profit Service Account (PSA) required for the upcoming profit payments due in January 2007. The balance in the PSA stood at RM347,726 as at 26 September 2006, representing a shortfall of RM1.4 million compared to the minimum balance requirement of RM1.8 million. Nevertheless, MARC was made to understand that Tracoma is able to utilise the fund in the Finance Service Reserve Account (FSRA) to make up for the shortfall in the PSA to service the profit payments amounting to RM3.7 million due in January 2007. As at 26 September 2006, the balance in the FSRA stood at RM3.89 million. Under the Trust Deed, Tracoma is required to replenish the amount utilised within 14 days with regard to the drawdown of the FSRA.

Tracoma’s current tight financial position is expected to be temporary; attributable to high development costs for the new car models, which Tracoma had incurred in advance, and the delay in securing the upward price revisions for auto parts it supplied to its major customers.  The shortfall in the PSA will be rectified in the event the additional claims for parts development and price revisions have been received. However, at this juncture, MARC is unable to ascertain the amount of cash inflow Tracoma will secure from the upward price revisions and its impact on the company’s debt servicing capability.

Meanwhile, the outcome/negotiation of its joint venture with Proton in Indonesia is yet to be resolved.

As such, MARC will continue to monitor the developments affecting Tracoma and disseminate any rating implications in due course.