Scomi Group Bhd, which is looking to issue new debt and refinance existing papers, yesterday saw the rating on its existing issuances downgraded with a “negative” outlook by Malaysian Rating Corp Bhd (MARC).
The rating agency yesterday lowered its rating on Scomi’s RM500 million medium-term note (MTN) programme by one notch to A+ from AA- and the latter’s funding vehicle KMCOB Capital Bhd’s RM630 million Murabahah MTN was also cut by a notch.
The downgrade was to reflect the company’s “low operating cashflow” relative to maturing debt obligations as well as “tight liquidity” at both Scomi and its 76%-owned Scomi Oilfields (SOL), which owns KMCOB, MARC’s statement read.
While the group can improve its operating cash flows in 2H11 on the back of improved market conditions, the rating agency believes noteholders of KMCOB and Scomi “face increased risk of a non-coercive debt rescheduling in coming months”.
MARC said it will likely lower ratings further if SOL and Scomi are unable to secure additional liquidity resources ahead of payment dates for forthcoming rated debt obligations. That said, MARC went on to say the outlook on the papers can be changed from “negative” to “stable” if SOL and Scomi are able to secure additional liquidity resources to pay down debt in accordance with existing debt maturity schedules.
Separately, Scomi yesterday announced plans to issue a new bond at KMCOB “arising from the disposal of assets which have fully realised its value” to bolster its balance sheet. It is understood that the issuance size is RM480 million.
“The group intends to proceed quickly and expeditiously to implement the plan, which would put it in a stronger, financially healthier position to prepare for new projects and activities that the company is bidding for and to expand its product portfolio along the oil and gas value chain,” Scomi said in a statement.
The new issue, it added, will give it “an appropriate capital structure” to support long-term business goals with increased financial flexibility both to navigate the current industry challenges and capitalise on opportunities in the market place.
Oilfield services provider SOL turned around with a pre-tax profit of US$12.5 million (RM40 million) for the six months ended June 30, 2011 (1HFY11) after two consecutive years of losses. At group level, Scomi posted an unaudited pre-tax profit of RM47.7 million for 1HFY11, a turnaround from a pre-tax loss of RM186.6 million for the whole of FY10.
Scomi calls itself the only locally owned drilling fluid and drilling waste management service provider with a domestic market share of about 65%.
With the recent increased drilling activities in Malaysia and the Eastern Hemisphere, its oilfield services division order book is in excess of RM1.1 billion as at end-1H11, it said.
Scomi closed unchanged at 26.5 sen yesterday, down 27.4% year-to-date.
Written by Joanne Nayagam, theedgemalaysia.com
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