(Refiles to correct spelling in first paragraph)
By Al-Zaquan Amer Hamzah
KUALA LUMPUR,Sept 6 RAM Ratings has downgraded
its outlook on Malakoff Corporation Bhd's 5.6 billion ringgit
and 600 million ringgit Islamic bond programmes to negative from
stable, citing the company's dwindling cash levels and highly
leveraged balance sheet.
The two programmes were initiated in 2007 to delist Malakoff
from the local bourse.
Malakoff has indicated plans to return with an initial
public offering (IPO) next year, an effort which could go
towards addressing the company's debt. It had consolidated
borrowings of 10.5 billion ringgit ($3.37 billion) at end 2011,
according to RAM.
RAM expects the company's financial position to become more
fragile due to the weight of recent investments. Malakoff
hascommitted 1.45 billion ringgit in equity towards the Tanjung
Bin power plant, Southeast Asia's biggest coal-powered
independent power producer (IPP).
It also purchased 40 percent of a power facility in Bahrain
for 310 million ringgit as part of Malakoff's ongoing overseas
expansion, which has involved projects in Saudi Arabia,
Algeria,Oman and Jordan.
"Given that these assets have long gestation periods and
substantial debts of their own to service prior to making any
distributions to Malakoff, incremental earnings and cash
generation from the investments are expected to remain minimal
in the near term," said RAM on Thursday.
The ratings agency also highilghted Malakoff's level of
dividend payouts, which averaged 174 million Malaysian ringgit
($55.80 million)in the past three years. "We are of the view
that such levels are likely to further impinge on the company's
financial robustness," said RAM.
Malakoff is 51 percent-owned by Malaysian builder MMC Corp
Earlier this month, Malakoff issued a 1.8 billion ringgit
30-year bond to reduce outstanding debt and fund working
capital. Proceeds went towards redeeming and cancelling a
50-year RM1.7 billion Islamic bond issued in 2007.
($1 = 3.1183 Malaysian ringgits)
(Reporting By Al-Zaquan Amer Hamzah)