MARC has placed PSSB Ship Management Sdn Bhd’s (PSM) long-term rating of BB-ID on its RM40 million Bai’ Bithaman Ajil Islamic Securities (BAIS) on MARCWatch Negative. The MARCWatch Negative placement reflects MARC’s heightened concerns over PSM’s ability to meet its upcoming December profit and principal payments on its BAIS given the near total lack of visibility on its net income from the long-term charter of its stationary training vessel, liquidity position and access to external funding sources. PSM continues to be in breach of its obligations to furnish annual audited accounts for four consecutive years from FY2005 to FY2008, provide quarterly budget on its operation and to maintain the minimum Debt Service Reserve Account (DSRA) required balance. MARC will consider suspending the rating if the required information to assess the appropriate rating level for the BAIS is not received prior to December 15, 2009.

PSM is a special purpose funding vehicle established by its holding company, PSSB Strategic Holdings Sdn Bhd (PSSB), to issue the BAIS. The Islamic debt facility will be repaid from annual rental proceeds of RM8.8 million due from the government under a 10-year time charter of its vessel, currently deployed under the Royal Malaysian Navy’s (TLDM) training programme. There is also a continuing lack of clarity on the manner in which PSM intends to address the final and largest redemption in December 2011 which occurs a year after the expiry of the time charter in 2010.

The current outstanding amount under the BAIS facility is RM22.47 million, comprising a RM20.0 million principal sum and RM2.47 million of profit payments. As at October 30, 2009, the DSRA balance stood at RM1.01 million against the estimated amount of RM6.56 million to be transferred from PSM’s operating account (OA), to cover its principal redemption and profit payments for the next 12 months in FY2010. To meet the upcoming profit payments of RM696,250 and RM5.0 million principal redemption due on December 15, 2009, PSM will need additional funds of RM4.69 million. PSM’s failure to meet its December obligations under the BAIS will result in a lowering of its rating to DID.

Contacts:
Lee Mei Lin 03-20902259 / meilin@marc.com.my,
Mac Lai Yew Weng 03-20902280 / lyweng@marc.com.my