MARC is maintaining its AID and MARC-2ID/AID ratings on Maxtral Industry Berhad's (Maxtral) RM80.0 million Al-Bai' Bithaman Ajil Islamic Debt Securities (BaIDS) and RM20.0 million Murabahah Underwritten Notes Issuance/Murabahah Medium Term Notes (MUNIF/MMTN), respectively on MARCWatch Negative. The rating actions affect RM40.0 million of outstanding BaIDS and RM20.0 million of notes issued under the MUNIF/MMTN programme.

The ratings remain under review for possible downgrade pending the company's release of its fourth quarter 2010 financial results. Maxtral had earlier reported a pre-tax loss of RM1.3 million for its third quarter and a cumulative pre-tax loss of RM7.7 million for the nine months to September 30, 2010. MARC had placed Maxtral's debt ratings on MARCWatch Negative on November 26, 2010 to highlight increased risk of non-compliance with the company's sinking fund schedule as a consequence of its limited balance sheet liquidity relative to the forthcoming RM20.0 million BaIDS repayment in April 2011.

MARC recently received confirmation from the trustee that Maxtral had met its minimum required sinking fund account balance of RM10.0 million due on January 2011. MARC also understands from the company that it will be relying on a bridging loan from a financial institution to cover its forthcoming sinking fund payment of RM10.0 million on March 13, 2011. While MARC believes that the risk of missed payment on the rated obligations over the near term has abated, the rating agency remains concerned with the company's ability to improve its financial performance and restore its credit metrics.

The ratings could be lowered if MARC's ongoing assessment of Maxtral leads the rating agency to conclude that the company is unlikely to be able to demonstrate recovery in its credit metrics commensurate with its current ratings over the next 12 months.

Contacts:
Lai Yew Weng Mac, +603-2082 2280 / lyweng@marc.com.my;
Francis Xaviour Joe, +603-2082 2279 / fxjoe@marc.com.my.