MARC has changed its MARCWatch status of its AA-IS rating on DRIR Management Sdn Bhd’s (DRIRM) RM160 million Class B Sukuk to Developing from Negative. The change in MARCWatch status follows recent action taken by a shareholder to restore DRIRM’s finance service coverage ratio (FSCR) to a level commensurate with its current rating. The rating was originally placed on MARCWatch in September 2010 due to a breach of DRIRM’s FSCR covenant of 2.25 times. Reduced monthly lease payments made by a related entity and the seller-lessee of the Sukuk’s underlying sale and leaseback transaction, MHS Aviation Berhad (MHSA), have been insufficient to provide the required 2.25 times coverage of annual debt service obligations under the Sukuk. In order to restore DRIRM’s FSCR to covenant levels, shareholder advances of RM45 million were recently deposited into DRIRM’s Debt Service Reserve Account (DSRA).

The rating will remain on MARCWatch Developing pending the completion of the proposed refinancing of the Sukuk. The continuing MARCWatch placement also considers the existence of refinancing risk and the negative pressure on the Sukuk rating in the event the refinancing does not materialise.

Contact:
Sandeep Bhattacharya; +603-2082 2247/ sandeep@marc.com.my