MARC continues to maintain Malaysian International Tuna Port Sdn Bhd’s (MITP) A+ID rated RM240.0 million Bai’ Bithaman Ajil Islamic Securities (BAIS) on MARCWatch Negative, where it had been first placed on February 19, 2009. The continuing MARCWatch Negative placement reflects MARC’s view that MITP faces acute and immediate challenges as implied by its strained liquidity profile, and increased project completion risk with the timetable for the project completion extending well beyond original expectations. 

While the upcoming May 18, 2009 profit payment on the BAIS can be satisfied in full by a recent transfer of funds to the sinking fund account from finance income earned on designated accounts, subsequent debt service payments prior to project completion will have to be met from additional capital to be provided by its shareholders.

Although MITP has informed MARC that it is taking steps to address its immediate challenges and is exploring the possibility of raising new capital from a government agency, the outcome of which remains uncertain. The recent developments raise uncertainties about MITP receiving timely financial support from the government which had earlier been key to MARC’s assignment of the A+ID rating.

MARC, in its initial MARCWatch placement on February 19, 2009, had highlighted a notice of breach by the trustee to MITP for failing to provide information on its plan to remedy a shortfall in its Finance Service Reserve Account 2 (FSRA), among others. During the subsequent informal BAISholders’ meeting on April 30, 2009, MITP gave a verbal commitment that it would make full redemption of BAIS before the next profit payment on November 17, 2009. On May 4, 2009, the trustee issued a request for MITP’s confirmation in writing of its intention to redeem the BAIS facility by November 17, 2009. Upon receipt of MITP’s confirmation which is to be received no later than 14 working days from May 4, 2009, that is by May 22, 2009, BAISholders will make their decision on whether to waive the notice of breach, to give indulgence or to declare an event of default.

Consequently, the MARCWatch Negative status incorporates the possibility of the rating being lowered if MITP’s BAISholders elect to declare an event of default and exercise their rights to accelerate the BAIS. However, should BAISholders elect to waive the breach, MARC will most likely lower its rating on the BAIS in the event that MITP fails to make meaningful progress on its capital-raising initiative by end-May 2009.

Contacts:
Khairul Emran Mahmud 03-2090 2278 / emran@marc.com.my;
Sharidan Salleh 03-2050 2243 / sharidan@marc.com.my