MARC has lowered its ratings on Paradym Resources Industries Sdn Bhd’s (“PRI”) RM40 million Islamic Commercial Papers / Medium-Term Notes Issuance Programme (“ICP/MTN”) to CID/MARC-4ID from AID/MARC-2ID. The ratings remain on MARCWatch Negative. The downgrades reflect MARC’s concerns as to the company’s ability to fund near-term commitments arising from the termination of a contract to supply raw materials by Bank Negara Malaysia (“BNM”). The termination of the Contract (“BNM Contract”) between PRI and BNM which is expected to reduce PRI’s revenue by more than 60% constitutes an Event of Default under the terms of the facility.

PRI is a manufacturer of copper rods, wire and strips. On 30 January 2004, PRI and BNM entered into an Agreement for the Purchase of Raw Materials for the production of metal coin strips. PRI had also entered into a 10-year agreement on 9 March 2004 with The Royal Mint of Malaysia Sdn Bhd (“RMM”), the sole official minter for circulation coins in Malaysia, for the supply of Cupro-Nickel 25 (“CuNi”) strips (“CuNi Contract”). RMM became a wholly owned subsidiary of PRI in March 2006.  

PRI’s most recent profit payment in connection with the rollover of its RM40 million CP on May 14, 2007, was funded by a drawdown on its Finance Service Reserve Account (“FSRA”) balance. PRI has 14 days to replenish the FSRA now. The next rollover of its CP will be on June 14, 2007. PRI is also obligated to transfer RM5 million progressively into the Principal Service Account (“PPSA”) for a scheduled programme limit reduction on July 16, 2007. Failure to meet either of these commitments will result in a downgrade of the ratings to ‘DID’.