16 Jul 2013 07:54

KUALA LUMPUR, July 15 (Bernama) -- The Malaysia Rating Corporation Bhd (MARC) has downgraded its ratings on Kinsteel Bhd’s (Kinsteel) RM100.0 million Murabahah Commercial Papers/Medium- Term Notes Programme to MARC-4id/BB+id from MARC-3id/BBBid.

The rating agency also downgraded RM100.0 million Murabahah Medium-Term Notes (MTN) Programme to BB+id from BBBid previously.

Concurrently, both ratings have been placed on MARC Watch Negative.

MARC said the rating downgrade and Marc Watch placement reflected concern over Kinsteel’s limited liquidity and heightened refinancing risk associated with its upcoming CP/MTN and MTN maturities.

"Refinancing risk has increased as its August CP/MTN and September MTN maturities of RM40.0 million and RM10.0 million, respectively, draw closer.

"Kinsteel’s recent weak operating results, stemming from a continuing period of difficult steel market conditions and the prospect of continued weak financial performance, are expected to pose constraints to its financial flexibility," it said in a statement.

Kinsteel has RM40.0 million notes issued under its CP/MTN programme maturing on August 28, 2013 and RM10.0 million of MTN maturing on September 6,2013.

"Kinsteel’s recent weak operating performance, affected by steel sector's tough operating environment and the group’s sizeable debt, is viewed as the challenges faced by the group in generating sufficient liquidity to meet its current obligations without relying on external funding," MARC added.

The group registered lower revenue and operating profit of RM410.1 million and RM7.6 million for the first quarter ended March 31, 2013 from RM506.1 million and RM48.6 million recorded in the corresponding quarter last year.