MARC continues to maintain Matang Highway Sdn Bhd's (Matang) AIS rating for its RM70.0 million Sukuk Musharakah on MARCWatch Negative where it was placed on December 13, 2010.

Subsequent to MARC's last rating action, the rating agency was notified by the sukuk trustee on December 15, 2010 that Matang had been granted a cure period until December 31, 2010, to remedy the RM0.69 million shortfall in its Sinking Fund Account (SFA) against the minimum required balance of RM10.5 million by end-November 2010. MARC was later informed that the RM0.69 million shortfall in Matang's SFA had remained unremedied as of December 20, 2010.

Matang will still be required to meet its SFA minimum required balance of RM12.0 million by end-December 2010 and to ensure that the SFA is fully funded by February 2011.

The rating will be lowered should Matang not meet the November 2010 SFA requirement by December 31, 2010 and/or subsequent scheduled payments into the SFA irrespective of further indulgence granted by Sukukholders. MARC regards the failure to comply with the revised SFA payment schedule as an indication of heightened default risk.

Conversely, MARC will remove Matang's rating from MARCWatch Negative once the SFA and finance service reserve account balances are sufficient to meet the final redemption of the Sukuk in May 2011.

Contacts:
Sandeep Bhattacharya, +603-2082 2247 / sandeep@marc.com.my;
Khairul Emran Mahmud, +603-2082 2278 / emran@marc.com.my;
Ezien Hoo, +603-2082 2267 / ezien@marc.com.my.