Ranhill Says No Problem To Service Debt

Blogged yesterday, Ranhill Credit Rating Put On Negative Watch!

On today's Financial Edge, Ranhill has come out defending itself in the following article, Ranhill says it will be able to service debt

• 04-09-2008: Ranhill says it will be able to service debts
  
  KUALA LUMPUR: Ranhill Bhd, which has come under pressure after the company reported a loss of RM719.4 million in the fourth quarter (4Q) ended June 30, 2008, has reiterated that it will be able to service its current debt obligations as its cash flow remains healthy.
  
  The company said the group's cash flow was now focused on its water, power and engineering, procurement, construction and commissioning (EPCC) segments which would assist the respective divisions' operational needs and requirements.
  
  "In the next few years, the company will enjoy a period of consolidation and we are confident that we will be able to turn the difficulties and challenges of the previous years into opportunities," the company said in a statement here yesterday.
  
  In the past one year, Ranhill has taken private its subsidiaries Ranhill Utilities Bhd and Ranhill Power Bhd. The main reason is for the holding company to consolidate the cash flow from its subsidiaries in the utilities business to mitigate the fluctuating cash flow from its construction business.
  
  Ranhill, which is controlled by Tan Sri Hamdan Mohammad, also disposed of its interest in the oil and gas (O&G) companies, whereby the parent company will not have to fork out additional capital expenditure on the capital intensive business.
  
  The disposal of the O&G business contributed to the losses in 4Q as the company had to provide for RM48 million for loss on disposal and impairment in asset.
  
  Following the release of its results last Friday, Standard & Poor's said on Monday that it may downgrade Ranhill because of delays in some of its project and weaker "credit metrics".
  
  S&P placed Ranhill's corporate credit rating on watch with "negative implications". The rating agency may also downgrade the B-rating on Ranhill's US$200 million (RM690 million) notes.
  
  However, Fitch Ratings said in a statement yesterday there would be no immediate change to its rating of "B" with a stable outlook on Ranhill as the losses reported were attributable to non-cash items which have no immediate impact on its debt servicing ability.
  
  "The majority of such non-cash charges relate to the Melut basin development project in Sudan," Fitch said in a statement.
  
  It said in 4Q, Ranhill provided RM316 million on account of cost overruns incurred on this project and a further RM240 million due from its joint-venture partner in this project.
  
  In addition to those provisions, Ranhill also registered a loss of RM48 million arising from the disposal of some of its investments in the O&G exploration segment.
  
  Following its exit from the O&G exploration and production business, the biggest project in Ranhill's order book is a housing project in Libya estimated at RM13 billion.
  
  According to Fitch, the company is negotiating with the Libyan government on some amendments to the contract value to reflect the increased cost.
  
  "Given the significant size of this project, Ranhill failing to make positive cash generation from this project will adversely affect its ratings," it said.