MARC has placed the ratings of PRI’s RM40.0 million Islamic Commercial Paper/Medium Term Note Issuance Programme, currently rated at A/MARC-2, on MARCWatch Developing with immediate effect. This is premised on a recent site visit to PRI's factory in Nilai, Negeri Sembilan where an absence of production activity and inventory were noted. The management represented that there is on-going maintenance activity that is expected to continue until the 3rd week of May 2007. However, no maintenance activity was observed during the visit. Also in light of certain events related to allegations by the press that PRI was being investigated by the Central Bank for a shortfall of coins in circulation, MARC is examining operational risk and confidence issues as well as the potential financial impact of the said developments. MARC is in the midst of seeking clarification from relevant parties to resolve the MARCWatch placement.
A recent Ratings Watch on PRI, arising from ABRAR Discount Berhad’s cessation of business, was recently lifted in April 2007 following confirmation from the company that it has taken steps to refinance an RM46 million Murabahah Multi Option Notes issuance facility (the facility), which is not rated by MARC, at its subsidiary, The Royal Mint of Malaysia Sdn Bhd (RMM). In the interim period, MARC understands that the Islamic commercial papers are currently being rolled over, mitigating MARC’s earlier concerns.
PRI is the holding company of RMM, the sole official minter of circulation coins in Malaysia. Apart from producing copper strips used in the manufacture of coin blanks for RMM, PRI manufactures copper wires and copper rods for the telecommunication and power sectors. PRI derives the majority of its revenues and operating profits through contracts with RMM and the Central Bank for the supply of copper strips.
MARC is currently seeking clarification from Bank Negara Malaysia (BNM) on the status of PRI’s 10 year contract with the Central Bank and will closely monitor the developments at as they evolve. Any rating implications arising therefrom will be advised as they become clear.