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MARC uplifts rating suspension of Trinity Corporation Berhad's (formerly known as Talam Corporation Berhad) settlement BaIDS, maintains B+ID rating on MARCWatch Negative

MARC has lifted the suspension of its rating of B+ID on Trinity Corporation Berhad's (Trinity) outstanding RM95.1 million Settlement Bithaman Ajil Debt Securities (Settlement BaIDS) and placed the rating on MARCWatch Negative.

Since MARC announced the suspension of Trinity's rating on February 27, 2012, the rating agency has received pertinent information on Trinity from the company's management to conduct surveillance on the rating. MARC has initiated its review of Trinity's rating, which the rating agency has placed on MARCWatch Negative pending the outcome of wholly-owned subsidiary Ample Zone Sdn Bhd's (Ample Zone) negotiations with its sukukholders.

Ample Zone had earlier defaulted on its principal repayment of RM84.65 million under its Sukuk Ijarah obligations but its sukukholders have not declared an event of default. The company is in negotiation with sukukholders for indulgence to be granted on the basis of meaningful progress being made to dispose properties encumbered to the issue. Notwithstanding the ongoing progress, should Ample Zone's sukukholders declare an event of default, this would trigger a cross-default under Trinity's Settlement BaIDS. Accordingly, the MARCWatch Negative placement on the rating principally reflects heightened default risk for Trinity as a result of cross-default provisions in outstanding sukuk and debt issues of Ample Zone and Trinity.

Since MARC's December 6, 2010 rating announcement on Trinity, the rating agency notes that Trinity has continued to make progress in paying down its Settlement BaIDS with proceeds from asset disposals. The outstanding principal of the Settlement BaIDS has since reduced to RM95.1 million as of May 25, 2012. In addition, convertible securities outstanding declined from RM256.3 million as at end-FY2011 to RM80.1 million as at-end FY2012. As a result of the reduced outstanding Settlement BaIDS and convertible securities, the group's debt-to-equity (DE) ratio declined to 0.77 times as at end-FY2012 from 1.17 times a year ago.

For the 12 months ended January 31, 2012 (FY2012), the group registered improved revenue of RM632.3 million (FY2011: RM183.4 million) mainly due to disposal of land parcels. Excluding this, Trinity's revenue of RM286.7 million would mainly consist of progress billings from development activities, which rose to RM184.3 million in FY2012 (FY2011: RM77.5 million). Trinity narrowed its pre-tax loss to RM117.5 million, down from RM153.8 million in the previous year.

MARC expects the weak profitability profile of Trinity to continue in the near term; there is low visibility on future property development earnings against the gross development value of ongoing projects of about RM200.0 million. Trinity continues to face the challenge of generating sufficient cash flow to address its large remaining debt burden from timely asset disposals and its limited property development activities. To maintain an adequate financial profile for the rating category, Trinity will have to accelerate its asset disposal program to meet the group's significant near-term obligations, with short-term borrowings of RM269.3 million as at January 31, 2012.

MARC will continue to monitor the progress of ongoing negotiations between Ample Zone and its sukukholders and take appropriate rating action where warranted. Should Ample Zone's sukukholders consent to a maturity extension, MARC will likely remove its B+ID rating on Trinity's Settlement BaIDS from the MARCWatch placement and affirm the rating with a stable outlook.

Contacts: Thian Chow Di, +603-2082 2280/ chowdi@marc.com.my; Rajan Paramesran, +603-2082 2233, rajan@marc.com.my.

© Press Release 2012

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