MARC has placed its A rating of Haisan Resources Berhad’s (HRB) RM30 million bonds on MARCWatch Negative. The MARCWatch placement follows the release of its unaudited results for the three months ended March 31, 2008 (1Q2008) which showed a 65% drop in pre-tax profit to RM1.5 million compared to the corresponding quarter in 2007. The lower than expected financial performance reduces the likelihood of a near-term restoration of HRB’s maximum covenanted debt-to-equity (DE) ratio to 2.0 times. HRB remains in breach of its gearing cap with its DE of 2.42 times as of March 31, 2008.

HRB is principally involved in the whole spectrum of the refrigeration and ice industry, which includes provision of temperature controlled logistics (TCL) services, engineering services related to industrial refrigeration, ice manufacturing and warehousing. HRB’s dismal financial performance in 1Q2008 is mainly attributed to fewer engineering projects undertaken, higher interest cost as well as higher depreciation charges due to completion of new TCL facilities. MARC has been informed of HRB’s plans to pare down its borrowings, which may be by way of partial redemption of its bonds and/or disposal of its non-core assets.

MARC will also be closely monitoring the company’s progress in debt reduction including a bondholders’ meeting to be convened shortly on its covenant breach. Failure to strengthen its balance sheet and continued weak financial performance could lead to a rating downgrade.

Contacts:

Khairul Muzamel Perera, 03-2090 2247/ kevinkhairul@marc.com.my;
Elea Nor Zainal, 03-2090 2263/ elea@marc.com.my.