MARC’s AIS rating on Ingress Sukuk Berhad’s (Ingress) RM160 million Sukuk Al Ijarah Issuance Programme, remains on MARCWatch Developing following an extension of the remedy period given to Ingress until July 26, 2008,  to resolve a breach in certain financial covenants under the Ijarah Agreement. Notwithstanding, MARC acknowledges the Sukukholders’ rights of acceleration under the circumstances as reflected in the reclassification of the long-term portion of the Sukuk as current liability in its audited accounts for the year ended January 31, 2008. The directors and management of Ingress are currently in the midst of finalizing the details of a plan to refinance the Sukuk. Accordingly, the MARCWatch placement highlights the importance of executing timely refinancing of the Sukuk and/or addressing the unresolved covenant breaches.

The rating had been placed on MARCWatch Developing on April 11, 2008 following Ingress’ non-compliance with its gearing (debt to equity ratio) cap of 1.75 times and  aggregate encumbrances (over all of its present of future revenue or assets) limit of 20% of net tangible assets, based on its financial statements for the year ended January 31, 2007.  Ingress’ recent improved earnings and cashflow generation moderates somewhat the increased refinancing risk that the Group currently faces from potential early redemption of the Sukuk. For the three-month period ended April 30, 2008, Ingress had recorded a pre-tax profit of RM6.6 million against an immediate preceding quarter loss before tax of RM7.3 million and a RM13.4 million for the year ended January 31, 2008. Additionally, the Group’s total borrowings have decreased slightly since January 2008 to RM328.3 million as at April 30, 2008.

Ingress continues to maintain sufficient cash balances to meet its immediate obligation of the Sukuk and the balances in the Ijarah Service Rental Accounts are expected to be sufficient to meet the upcoming rental payment.

Ingress is a funding vehicle specifically set up to raise the Sukuk for Ingress Corporation Berhad, which is principally an investment holding company with subsidiaries primarily involved in automotive components manufacturing, with increasing exposure in power engineering and railway electrification and to a smaller extent, the oil and gas sector.