Rating Agency Malaysia has reaffirmed the long-term rating of A1(bg) and short-term rating of P1(bg) for the MYR 150 million Commercial Papers/Medium Term Notes Issuance Programme (CP/MTN) of Malaysia…
Rating Agency Malaysia has reaffirmed the long-term rating of A1(bg) and short-term rating of P1(bg) for the MYR 150 million Commercial Papers/Medium Term Notes Issuance Programme (CP/MTN) of Malaysian Sheet Glass Sdn Bhd (MSG). In a statement on 6 March 2006, RAM said the rating reflects the unconditional and irrevocable guarantee extended by a consortium of three financial institutions, based on the weakest-link approach. The bank guarantee enhances the credit risk profile of the CP/MTN beyond MSG“s inherent or stand-alone credit risk, the agency said. MSG, the only producer of flat glass (float and figured) in Malaysia, is still exposed to risks that affect general demand for glass. RAM said the domestic glass market has always faced illegal imports from China, especially in the construction sector. The authorities, including Malaysian Industrial Development Authority (Mida) and Customs officials, have been collaborating to minimise its availability, the agency said. Meanwhile, MSG“s had carried out cold repairs on its second furnance in Johor Baharu at a cost of MYR 58 million. Operations were restarted in April 2005. The rating agency said this had raised its production capacity from 2.4 million converted cases in 2004 to the current 4.14 million. For the financial year ended December 2005, MSG“s annualised revenue is expected to grow by 18.5% to MYR 324.34 million from MYR 273.64 million in 2004. The company“s net gearing ratio increased to 1.32 times as of end-October 2005, from 1.13 times as of end of 2004 as its level of debt rose from MYR 273.76 million to MYR 317.74 million. This has been largely driven by an increase in long-term loans to finance the installation of MSG“s new MYR 22 million printing-and-cutting line for its glass plant in Sungai Buloh, Selangor. In line with its heavier borrowings and reduced net cashflow from operations, the company“s operating cashflow debt coverage weakened to 0.17 times as of end-October 2005 compared to 0.29 times as of end-2004. For the 10 months ended 31 October 2005, MSG“s net operating cashflow fell substantially to MYR 45.73 million from MYR 78.79 million of 2004, mainly because of variations in its working capital