MARC has affirmed its rating of AAAIS(fg) on Antara Steel Mills’ s RM300m Sukuk Mudharabah programme with a stable outlook. The affirmed rating and outlook are underpinned by the unconditional and irrevocable financial guarantee provided by Danajamin Nasional Berhad which carries a financial insurer strength rating of AAA/stable from MARC.
Antara’s standalone credit profile remains weak amidst challenging conditions for the domestic steel industry characterised by excess supply and cheaper steel imports from China. These factors have impeded local steel producers from benefiting from improved demand driven by an increase in infrastructure activity. In addition, Antara has sizeable unpaid receivables due from two related companies, namely Megasteel and Lion.
With no significant recovery in the steel industry expected in the near term, MARC anticipates the weakness in Antara’s operating performance to persist. The company’s liquidity remains very tight with limited financial flexibility, and it continues to rely on cash flows generated from operations to meet short-term obligations.