MARC downgrades Scomi debt rating (7158)

Malaysia Rating Corporation Bhd (MARC) has downgraded Scomi Group Bhd's RM500 million medium term notes programme to
BB+ from BBB+.

The rating agency also maintained MARCWatch Negative on the company.

MARC said the rating action affects RM200 million of outstanding notes due on Sept 28.

"The
rating downgrade primarily reflects heightened repayment uncertainty as
a result of Scomi's delay in addressing the remaining contingencies to
the closing of earlier announced equity divestments," it said in a
statement.

It said Scomi has yet to fulfil the last remaining
conditions precedent to Nigerian-based oil service company, AOS Orwell
Ltd's, obligation to close its acquisition of equity stakes in Scomi
Nigeria Pte Ltd and Oiltools Africa Ltd.

The rating agency said
the setbacks that Scomi had encountered in its initiatives to address
its final repayment of the outstanding notes had increased the risk
that the group would have inadequate funds to cover its obligations on
their due date.

MARC opines that the holding company was
currently dependent on favourable conditions to satisfy remaining
contingencies to closing the equity divestment and refinancing
transactions.

The rating agency said timely receipt and
placement of proceeds in its debt service reserve account was also
required for Scomi to meet its tight repayment timeline but the company
has yet to formulate a specific contingency plan to address further
delays to the above mentioned transactions.

MARC will resolve
the MARCWatch Negative placement and withdraw its BB+ rating on Scomi's
MTN programme once the holding company has completed repayment of the
notes.

However, in the event that Scomi fails to make the
repayment due on Sept 28, 2012, MARC will lower Scomi's debt rating to
D. Bernama