MARC has downgraded its rating on Ingress Sukuk Berhad’s (ISB) RM160 million Sukuk Al Ijarah to CIS from BB-IS. The rating remains on MARCWatch Negative. ISB is the funding vehicle of Ingress Corporation Berhad (Ingress). The rating action is based on ISB’s decision to postpone RM45.0 million of the RM50.0 million upcoming first tranche sukuk payment due on July 9, 2009 for six months. While approval has been obtained from the majority of its sukukholders, MARC considers the deferral, which is expected to be an initial step in the financial restructuring of the Ingress Group, to be characteristic of financial distress. The extension is conditional upon ISB fulfilling a RM5.0 million part payment on July 9, 2009.  ISB had earlier failed to deposit two scheduled sinking fund payments of RM25.0 million each on April 9, 2009 and June 9, 2009 for the RM50.0 million sukuk redemption.

The Ingress Group is principally involved in automotive components manufacturing, with modest exposure to the power engineering, railway electrification and the oil and gas sectors. For the past few quarters, Ingress has suffered from nominal liquidity, including reduced bank borrowing capacity, and unresolved covenant breaches. The auto component maker’s result and cashflow measures have been negatively impacted by lowered demand for its automotive parts due to continuing weakness in new vehicle sales. For the three-month period ended April 30, 2009, Ingress continues to display weak profitability and liquidity as reflected in its strained 1.0% profit-before-tax margin (FYE 1/2009: -7.5%) and cash and cash equivalents of -RM5.1 million (FYE 1/2009: RM3.4 million).

The current rating will be lowered to DIS upon confirmation of ISB’s failure to make full and timely payment on July 9, 2009.

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