MARC has downgraded its rating on marine services provider Alam Maritim Resources’ RM500 million Sukuk Ijarah Medium-Term Notes to BB+IS from BBB+IS. The rating remains on MARCWatch Negative.
MARC had earlier placed the Sukuk rating on MARCWatch Negative on May 30, 2017 to highlight the Sukuk’s increased vulnerability to missed payments or a distressed exchange following the company’s announcement that it had sought the Corporate Debt Restructuring Committee’s assistance to mediate negotiations with its creditors.
Tohe downgrade to BB+IS reflects heightened default risk with respect to a scheduled RM30.0 million principal Sukuk payment due on July 6, 2017. Alam Maritim continues to remain under an informal standstill arrangement with its financiers, the continuation of which is conditional upon the company submitting a proposed debt restructuring scheme that is in compliance with the CDRC’s restructuring principles by end-July 2017.
The balance of the sinking fund account for the Sukuk, last given as RM25.3 million as at end-April 2017, is insufficient for the purpose of meeting Alam Maritim’s upcoming Sukuk principal payment. The company has not shared any plan on how it intends to address the upcoming payment, which leads the rating agency to believe that there is a very high likelihood that Alam Maritim will be unable to meet its RM8.3 million balance sinking fund obligations towards the upcoming profit and principal payments on the Sukuk.
MARC will lower its rating on these Sukuk notes to DIS if Alam Maritim fails to pay the scheduled RM30.0 million payment as it comes due. The rating agency will resolve the MARCWatch if Alam Maritim makes the necessary payment and provides a credible plan to meet its debt obligations over the next six months.