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-RAM Ratings trims Texchem's long-term rating to BBB1.

BANKING AND CREDIT NEWS-November 18, 2011--RAM Ratings trims Texchem's long-term rating to BBB1(C)2011 M2 COMMUNICATIONS http://www.m2.com

18 November 2011 - RAM Ratings cut on Friday to BBB1 from A3 the long-term rating on the MYR100m (USD31.6m/EUR23.4m) commercial papers/medium-term notes programme of Malaysian diversified company Texchem Resources Bhd (KUL:TEXCHEM).

The outlook is "negative".

At the same time, the agency confirmed the short-term rating on the programme at P2.

The rating action is premised on Texchem's weakening in its business and financial performance, with three of the group's five divisions recording poorer-than-expected results in the first nine months of the fiscal year to 31 December 2011, the agency said.

"Now into its 4th year of net losses, Texchem's eroded shareholders' funds and heftier debt load are undermining the strength of its balance sheet; the Group is highly leveraged, with an adjusted gearing ratio of 1.97 times as at end-September 2011. Moving forward, the Group's adjusted gearing ratio is expected to deteriorate, mainly due to a heavier debt load. Should its losses persist, its shareholders' funds would also be eroded," Kevin Lim, RAM Ratings' head of Consumer and Industrial Ratings, said.

According to Lim, the group's liquidity is tight, given its significant volume of short-term borrowings on the back of cash results.

"Nonetheless, RAM Ratings understands that Texchem is looking at unlocking value of some of its assets. We believe this will generate significant net cash inflows that will help to considerably strengthen its balance sheet and liquidity position," he added.

Meanwhile, Texchem's established market position and geographical and business diversity have positive impact on the ratings, the analysts noted.

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Publication:M2 Banking & Credit News (BCN)
Date:Nov 18, 2011
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