MARC has downgraded its ratings on Hytex Integrated Berhad’s (Hytex) RM100.0 Million Murabahah Underwritten Notes Issuance Facility/ Islamic Medium Term Notes (MUNIF/IMTN) to MARC-4ID/B+ID from MARC-3ID / BBB-ID. Its rating outlook has been revised to negative from developing. The rating action follows Hytex’s partial deferment of an interest payment on a collateralised loan obligation (CLO) due on July 21, 2010 which has heightened repayment risks for the MUNIF/IMTN.

MARC understands that a group-wide restructuring exercise is being implemented by Hytex to address all of its debt obligations. Notwithstanding the restructuring exercise, MARC notes that Hytex has continued to register weak financial performance with a pre-tax loss of RM30.6 million for unaudited financial year ending March 31, 2010 (FY2010) (FY2009: RM7.8 million). Its debt-to-equity ratio rose to 2.83 times from 1.90 times a year ago. While Hytex recorded positive cash flow from operations of RM12.7 million in FY2010 (FY2009: negative RM295,000), this has been insufficient to service its debt obligations.

The negative rating outlook reflects Hytex’s increased risk of default arising from potential acceleration of the garment maker’s debt prior to the completion of its restructuring scheme. MARC will continue to monitor developments on this front and determine whether revisions to the current ratings are required.

Contacts:
Jason Kok, 03-2090 2258/ jason@marc.com.my;
Rajan Paramesran 03-2090 2233/ rajan@marc.com.my