Englotechs Holding Bhd’s (Englotechs) BBB-ID rating in respect of its RM50.0 million Murabahah Medium-Term Notes Programme (MMTN) remains on MARCWatch Negative where it had been placed since April 1, 2008 pending the resolution of the breach in its Finance to Net Tangible Assets Ratio (FNR) covenant under the terms of the notes issuance. MARCWatch Negative placement continues to reflect uncertainty over the company’s ability to address the  breach of its FNR covenant within the extended remedy period which ended on September 22, 2008.

Following discussions with noteholders, Englotechs has agreed to provide additional security which is currently being perfected as consideration for an extension of the remedy period to redress the covenant breach. The company has also been timely with its latest profit payment made on the 26 September 2008. However, its financial profile and short term liquidity position continue to be weak due to rising operating costs and delays in the start-up of its water-based glove product as well as intense competitive pressures from China’s low-cost cotton glove manufacturers.

Englotechs is involved in the manufacturing and trading of cotton gloves, primarily industrial work gloves. Its manufacturing facilities are located in Padang Meha Industrial Estate, Kedah and Lianyungang, China.

The rating remains on MARCWatch Negative to highlight the possibility that it could be lowered further in the near-term pending completion of our ongoing rating review.

Contacts:
Khairul Muzamel Perera 03-2090 2247/ kevinkhairul@marc.com.my;
Francis Xaviour Joe, 03-2090 2279/ fxjoe@marc.com.my