MARC has lowered its rating on Ingress Sukuk Berhad’s (ISB) RM160 million Sukuk Al Ijarah (Sukuk) to BBB-IS from A-IS and maintains the lowered rating on MARCWatch Negative where it had been first placed on July 28, 2008. ISB is a wholly-owned funding vehicle of auto parts manufacturer, Ingress Corporation Berhad (Ingress).

The downgrade considers Ingress’ insufficient liquidity resources as well as the lack of positive developments with regard to its refinancing initiatives and asset disposals vis-à-vis its upcoming scheduled RM50 million Sukuk redemption in July 9, 2009 since our last rating action on February 25, 2009.  Ingress’ unrestricted cash balance which has declined further to negative RM0.5 million net of overdrafts as of January 31, 2009 indicates that the autoparts maker will be severely challenged to meet its RM25 million sinking fund build up payment on April 9, 2009 in connection with the July 9, 2009 scheduled redemption of the Sukuk. 

MARC understands that Ingress is seeking a waiver of the sinking fund build-up requirement from the Sukukholders which have yet to approve the company’s request.  The automotive sector is currently facing a severe downturn in demand and MARC believes that the prospects for immediate recovery are remote.  Hence, Ingress’ financial performance and its near term debt service capacity are not expected to recover in time. As such, the MARCWatch Negative incorporates the possibility of further rating downgrade in the event Ingress fails to make the required RM25 million sinking fund payment on April 9, 2009.

Contacts:
Hafizan Haron 03-2090 2238/ hafizan@marc.com.my
Lee Mei Lin, 03-2090 2259/ meilin@marc.com.my