Friday, 26 Jan 2007

RAM statement on Jan 26

Rating Agency Malaysia (RAM) opines that the cessation of Abrar Discount Berhad’s (Abrar) operations, effective Dec 31, 2006, has no immediate impact on the A2/P2 ratings of The Royal Mint of Malaysia Sdn Bhd’s (Royal Mint or the Company) RM46 million Murabahah Multi Option Notes Issuance Facility (2004/2011) (MONI or the Facility), or the A3/P2 ratings of IRIS Technologies (M) Sdn Bhd’s ( IRIS Tech) RM40 million Commercial Papers/Medium-Term Notes Programme (20043/2011) (CP/MTN).These are the 2 RAM-rated debt securities which Abrar is involved in.

In Royal Mint’s case, Abrar had been the Facility Agent, Issue Agent Paying Agent, Underwriter and Tender Panel Member for the MONI.

The outstanding short-term Notes – due for roll-over on January 29, 2007 – are currently held by Abrar (RM21 million), Affin Investment Bank Berhad (Affin Investment, RM17 million) and MIDF Amanah Investment Bank Berhad (MIDF Amanah, RM8 million).

RAM highlights that the amounts held by each of these three investors also correspond to theirrespective underwriting commitments vis-à-vis the MONI.

Under the circumstances, RAM does not envisage complications in relation to the roll-over of the RM25 million portion of the MONI held and underwritten by Affin Investment and MIDF Amanah.

Meanwhile, RAM has also received verbal confirmation that Abrar (now effectively under the administration of Prokhas Sdn Bhd (Prokhas), which is wholly owned by the Ministry of Finance, Incorporated and appointed by Bank Negara Malaysia) will remain as a Noteholder – at least for the immediate roll-over.

In the meantime, Royal Mint and Prokhas are in the process of finalising a grace period to effect further actions vis-à-vis resolving this matter. On this note, RAM understands that Royal Mint is currently exploring refinancing options.

RAM opines that these plans would be adequately supported by the Company’s steady credit profile, which is underpinned by its market position as the sole coin minter in the country – a privilege granted by the central bank.

Considering the above, RAM opines that the immediate roll-over risk associated with the cessation of Abrar’s operations has been sufficiently alleviated for the time being. RAM will continue monitoring developments related to the issue.

Elsewhere, Abrar had also been one of two underwriters (the other being Malaysia Discounts Berhad, now part of MIDF Amanah) for Iris Tech’s CPs.

As at December 31, 2006, RM20 million of CPs remained outstanding; these will be due for repayment on 19 April 2007.

RAM understands that Iris Tech will repay the outstanding CPs underwritten by Abrar (i.e. RM10 million) through internal funds – hence circumventing its roll-over risk.

On the other hand, Iris Tech will continue to roll over the other RM10 million not underwritten by Abrar. As at September 30, 2006, the Iris group of companies had about RM51 million of cash.