May 08 2012
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RAM Ratings downgrades Hubline's ratings from A2/P1 to BBB1/P2
Hubline is involved in the provision of container and dry-bulk shipping services as well as vessel chartering. The Group's container and dry-bulk vessels ply intra-Asian and Indian sub-continental routes. Hubline operates 20 containerships, 2 handy-sized bulk carriers and 15 sets of tugs and barges.
The downgrade reflects a weakening in Hubline's liquidity position and heightened refinancing risk as it faces sizeable debt maturing in November and December 2012, the largest of which is the outstanding RM100 million CP/MTN and IDS. We opine that this risk is exacerbated by Hubline's persistently weak operating performance amid a very challenging business landscape.
The Group's cash and bank balances stood at RM52.46 million as at end-December 2011, against RM271.28 million of short-term borrowings. We understand that Hubline plans to repay the CP/MTN and IDS using proceeds from a private placement of shares, which could raise up to RM61 million (with RM40 million subscribed for to date), and utilising its cash reserves (RM30 million of its RM58 million cash balances as at end-February had been pledged for the redemption of its CP/MTN and IDS). The management has also represented that it will embark on further fund raising efforts upon the completion of the private placement of shares by June 2012. We highlight that Hubline's ability to repay its debts this year is highly dependent on the success of these refinancing exercises.
The negative outlook reflects our concerns regarding the Group's weak liquidity and short-term refinancing risk. We highlight that Hubline's ratings could face downward pressure if its business fundamentals weaken further or its financial and liquidity positions do not improve. In particular, its ratings could face a multi-notch downgrade if Hubline does not show significant progress in its equity fund-raising efforts and/or secure refinancing of its CP/MTN and IDS by end-August 2012. On the other hand, the outlook may be reverted to stable if Hubline is able to address its near-term liquidity concerns and demonstrate sustainable improvement in its business and financial profiles.
Woon Tien Ern
(603) 7628 1040
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security's market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations, transfer and convertibility risks, repatriation risk, currency risk or any other risk apart from credit risk.
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings' credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
Similarly, the disclaimers above also apply to RAM Ratings' credit-related analyses and commentaries, where relevant.
© Press Release 2012
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