Nam Cheong: OCBC downgraded Nam Cheong's credit rating to Negative due to the group's inability to sufficiently reduce its operating cash outflow from 2Q15 to 3Q15.
Its credit profile looks to continue facing pressure due to reliance on additional borrowings to meet operational needs. Liquidity looks to be pressured as well.
Nam Cheong has an interest coverage covenant of 3.0x. Currently, OCBC estimates the interest coverage for 3Q15 to be just 3.1x. However, these estimates have not factored in capitalized interest.
Though Nam Cheong still has one more quarter to go as part of the 2H15 test period, given the tough environment, meeting the covenant could be challenging.
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