MARC is issuing this rating update in relation to the BBB+ rating of MK Land Holdings Bhd’s (MK Land) RM60.0 million outstanding bonds which is currently under review for possible downgrade. The rating review will consider MK Land’s current weak liquidity, and the challenging prospects for improving its near-term liquidity ahead of its upcoming RM60.0 million debt maturity in September 2009 given the continuing slowdown in the housing market. The review by MARC will also be focused on the outcome of MK Land’s effort to raise additional liquidity from asset disposals or other sources to meet its final redemption of the outstanding bonds in September 2009, and its corresponding sinking fund requirement which is to be met three months prior to maturity date, i.e. June 2009.

MK Land recently announced its business reorganisation plans following the return of Tan Sri Mustapha Kamal as Chief Executive Officer and Chairman. The plans which will be implemented in three phases over the next three to five years will include the disposal of land parcels. The time frame for the disposal of the land parcels remains uncertain at this juncture, the timeliness of which MARC views as critical to rebuilding its cash position.

For the three months ended September 30, 2008 (1QFY2009), MK Land generated a pre-tax profit of RM13.0 million compared to a pre-tax loss of RM7.9 million in 1QFY2008 and pre-tax loss of RM51.3 million in the preceding quarter (4QFY2008). Although its cash flow from operations was a positive RM14.0 million for the three-month period, its liquidity position remained strained. Its cash and bank balances and deposits with licensed banks were RM34.0 million compared to short-term borrowings of RM238.5 million which includes RM143.1 million of bank overdrafts. MARC expects to conclude its review for possible downgrade by end-December, 2008. If no positive changes occur in the near-term, this will likely result in the downgrade of MK Land’s rating. 

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