MARC has placed its B+ID/MARC-4ID ratings on Intelbest Corporation Sdn Bhd’s (ICSB) RM110.0 million Bai Bithaman Ajil Bonds (BaIDS) and RM50.0 million Murabahah Notes Issuance Facility (MUNIF) on MARCWatch Negative. The MARCWatch Negative placement indicates that the rating is under review for possible downgrade. The review was prompted by further deterioration in ICSB’s operating and financial trends since MARC’s previous rating action in July 2007, as well as its unresolved debt covenant breaches, and failure to furnish audited accounts for the last two financial years to MARC. (ICSB’s previous auditors were not able to provide an audit opinion in respect of the FY2005 accounts).

ICSB is principally an investment holding company and property developer with subsidiaries involved in property development in the Klang Valley. ICSB and its subsidiaries are currently undertaking three property development projects namely Saujana Putra, Ukay Bistari and Lestari Perdana. The Group’s financial performance was adversely affected by the stop work orders issued by the authorities on 1 June 2006 in respect of its Ukay Bistari project, following a landslide incident. Notwithstanding the completion of ICSB’s debt restructuring scheme and the lifting of stop work orders in July 2007, its operating trends have shown further deterioration, with higher cancellation and slower take-up rates for ongoing development projects. This has adversely impacted ICSB’s security coverage ratio. (The outstanding amounts under the BaIDS and MUNIF are secured from unbilled future receivables from sold units as well as future progress billings from unlaunched units) Unbilled future receivables from sold units presently provide a security coverage of 1.10 times, down from the 1.38 times as noted by MARC five months ago.

ICSB’s balance sheet is currently very weak, with negative shareholders’ funds of RM36.1 million. In addition, ICSB remains in technical default of its debt covenants, which could potentially result in an acceleration of its RM130.0 million outstanding BaIDS and MUNIF obligations. ICSB would not be able to meet all of its debt obligations if that scenario occurs.

MARC will resolve the MARCWatch placement upon conclusion of its review.