KUALA LUMPUR: Malaysian Rating Corp Bhd (MARC) has affirmed its ratings on Talam Corp Bhd's RM613.65 million loan stocks but the outlook has been revised to negative from stable on concerns about its limited future earnings visibility.
MARC said on Monday, Dec 6 it had affirmed its B and B- on Talam's RM356.25 million redeemable convertible secured loan stocks (RCSLS) and RM257.40 million redeemable convertible preference shares (RCPS) respectively.
'The outlook on the ratings has been revised to negative from stable. MARC is also withdrawing both ratings with immediate effect at the request of the issuer and will no longer carry out surveillance on these issues,' it said.
The rating agency said Talam's post-debt restructuring financial performance provided insufficient indication that it has remedied past difficulties.
'Additionally, most of Talam's major stalled property projects have now been completed or are nearing completion. Talam's future earnings visibility appears to be limited; its property development revenue continued to decline in 1HFY2011 compared to the preceding year's corresponding period,' it said.
Meanwhile, MARC affirmed its B+ID rating on Talam's RM134.21 million settlement Bithaman Ajil Islamic debt securities (Settlement Ba IDS). The outlook on the rating has also been revised to negative from stable.
MARC cautioned that the affirmed debt ratings and the outlook revision reflected its opinion that Talam's capacity for timely fulfillment of its obligations 'remains vulnerable to adverse developments following a review of the property developer's financial profile post-debt restructuring'.
'Talam's cash generation remains weak and its capacity to meet its financial obligations continues to be derived, in large part, from asset disposals and negotiations with creditors and lenders,' it said.
MARC said Talam's reported results for the two financial years ending Jan 31, 2010 (FY2010) and FY2009 have benefited significantly from debt and interest waivers as well as gains on asset disposals.
In the six months to July 31, 2010 (1HFY2011), Talam posted pre-tax profit of RM2 million on revenue of RM74.6 million.
However, MARC noted this profitability was also achieved as a result of a RM34 million debt waiver which MARC considered to be non-recurring in nature.
MARC also said the group's debt servicing commitments have declined post-debt restructuring; no coupons and dividends are payable on the RCSLS and RCPS.
Talam does not have to make profit payments on the Settlement BaIDS for the first three years. This significantly lowers the risk of missed payment obligations during periods of weak company-level and consolidated liquidity, as currently observed.
MARC said it had not received new information from Talam since the ratings on the restructured debt securities were first assigned. The rating agency does not have access to updated information on Talam's development projects and its plans to execute the divestment of assets securing the property developer's payment obligations under the Settlement BaIDS.
MARC said it would withdraw the remaining rating if it considers publicly available information on Talam to be no longer sufficient to continue surveillance on the property developer's rating.
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MARC said on Monday, Dec 6 it had affirmed its B and B- on Talam's RM356.25 million redeemable convertible secured loan stocks (RCSLS) and RM257.40 million redeemable convertible preference shares (RCPS) respectively.
'The outlook on the ratings has been revised to negative from stable. MARC is also withdrawing both ratings with immediate effect at the request of the issuer and will no longer carry out surveillance on these issues,' it said.
The rating agency said Talam's post-debt restructuring financial performance provided insufficient indication that it has remedied past difficulties.
'Additionally, most of Talam's major stalled property projects have now been completed or are nearing completion. Talam's future earnings visibility appears to be limited; its property development revenue continued to decline in 1HFY2011 compared to the preceding year's corresponding period,' it said.
Meanwhile, MARC affirmed its B+ID rating on Talam's RM134.21 million settlement Bithaman Ajil Islamic debt securities (Settlement Ba IDS). The outlook on the rating has also been revised to negative from stable.
MARC cautioned that the affirmed debt ratings and the outlook revision reflected its opinion that Talam's capacity for timely fulfillment of its obligations 'remains vulnerable to adverse developments following a review of the property developer's financial profile post-debt restructuring'.
'Talam's cash generation remains weak and its capacity to meet its financial obligations continues to be derived, in large part, from asset disposals and negotiations with creditors and lenders,' it said.
MARC said Talam's reported results for the two financial years ending Jan 31, 2010 (FY2010) and FY2009 have benefited significantly from debt and interest waivers as well as gains on asset disposals.
In the six months to July 31, 2010 (1HFY2011), Talam posted pre-tax profit of RM2 million on revenue of RM74.6 million.
However, MARC noted this profitability was also achieved as a result of a RM34 million debt waiver which MARC considered to be non-recurring in nature.
MARC also said the group's debt servicing commitments have declined post-debt restructuring; no coupons and dividends are payable on the RCSLS and RCPS.
Talam does not have to make profit payments on the Settlement BaIDS for the first three years. This significantly lowers the risk of missed payment obligations during periods of weak company-level and consolidated liquidity, as currently observed.
MARC said it had not received new information from Talam since the ratings on the restructured debt securities were first assigned. The rating agency does not have access to updated information on Talam's development projects and its plans to execute the divestment of assets securing the property developer's payment obligations under the Settlement BaIDS.
MARC said it would withdraw the remaining rating if it considers publicly available information on Talam to be no longer sufficient to continue surveillance on the property developer's rating.
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