MARC removes WCT from watch list

KUALA LUMPUR (Feb 3): Malaysian Rating Corp Bhd (MARC) has removed the rating on WCT Holdings Bhd’s RM2.5 billion debt programmes from its MARCWatch Developing list, as it is satisfied with the construction company’s plan to reduce the debt that had been affecting its credit ratings.

The two debt programmes were the RM1 billion medium term note programme, and the RM1.5 billion Sukuk Murabahah programme.

To pare down the debt, MARC noted in a statement yesterday that WCT is planning to raise funds via share placement and asset monetisation exercises.

As for the share placement exercise, MARC observed that WCT is planning to raise some RM212.5 million by placing up to 10% of its total paid-up capital to selected investors.

As for asset monetisation, MARC noted WCT’s plan to sell its office tower asset — Ascent Paradigm — to the Employees Provident Fund for RM347 million.

However, despite the two corporate exercises, MARC is still concerned with market and execution risks.

“Moreover, other components of these plans including the proposed sale of its malls are still in the early stages,” the rating firm said.

MARC added that it will likely revise WCT’s outlook to stable from negative, once there is a substantial progress on the deleveraging exercise.

As at end-September 2016, MARC said, WCT’s consolidated debt stood at RM2.8 billion with a net debt-to-equity ratio (D/E) of 0.87 times.

However, with WCT Holdings’ deleveraging exercise, MARC estimates the pro-forma net D/E ratio to reduce to around 0.56 times by end-September 2017.

“The ratings outlook could be revised to stable if the group improves its leverage and liquidity positions. The ratings would be lowered if WCT’s efforts to reduce net debt do not progress as anticipated or if subsidiary-level borrowings increase or the holding company’s debt obligations are subordinated to those of the operating subsidiaries,” the rating firm added.

To recap, MARC had on Nov 4, 2016, placed WCT in its basket of companies with credit ratings to be further evaluated.

This was after MARC learnt that WCT managing director Taing Kim Hwa, together with major shareholders, disposed of their equity stakes totalling 19.7% to Dominion Nexus Sdn Bhd, a company that is substantially owned by property and real estate tycoon Tan Sri Desmond Lim Siew Choon.

Since then, Taing has resigned as the managing director of WCT, while Lim has been appointed as WCT’s executive chairman.

This article first appeared in The Edge Financial Daily, on Feb 3, 2017. Subscribe to The Edge Financial Daily here.