MARC downgrades MNRB bond rating

KUALA LUMPUR: Malaysian Rating Corp Bhd has downgraded its rating on MNRB Holdings Bhd’s RM200mil Islamic medium term notes to A+IS from AAIS. The outlook is stable.
The
rating action reflects weakened holding company level financial metrics
following two consecutive years of losses for the financial years
ending March 31, 2010 (FY10) and FY11, and thin cash flow coverage
measures.
The lowered rating also incorporates MNRB’s reliance on
externally-provided liquidity to address the forthcoming December 2012
notes maturity.
The losses, due largely to lower dividends
upstreamed to the holding company by principal reinsurance subsidiary
Malaysian Reinsu-rance Bhd (Malaysian Re), had reduced MNRB’s
shareholders’ funds, exerting upward pressure on the holding company’s
double leverage ratio.
The ability of MNRB’s operating
subsidiaries to upstream higher dividends, meanwhile, continues to be
inhibited by the need for Malaysian Re to maintain a larger capital
buffer under a risk-based capital regime as well as the still modest
profits generated by MNRB’s operating subsidiaries relative to Malaysian
Re.
The stable outlook on the rating reflects adequate
mitigation of refinancing risk associated with the notes which are due
in their entirety on Dec 10, 2012. – Reuters