Bangkok--16 Sep--Moody's Investors
Approximately USD690 million of debt securities affected
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Moody's Investors Service sees noimmediate impact on the B2 corporate family rating of True CorporationPublic Company Limited and the B2 corporate family and senior unsecuredbond ratings of True Move Company Limited following True Move's tenderoffer for its outstanding USD690 million notes.
The outlook on the ratings remains negative.However, Moody's notes that if a substantial majority of the note holderstender under the current offer terms, it would have positiveimplications, leading to a potential change in the outlook to stable.
RATINGS RATIONALE
On 6 September 2011, True Move announced a tender offer and consentsolicitation for its USD465 million notes due in December 2013 and USD225million notes due in August 2014. The consent solicitation seeks toeliminate substantially all restrictive covenants, certain events ofdefault and related provisions contained in the indentures governing thenotes, and shorten the notice period for redemptions of the notes.
Should a majority of the bond holders tender their notes, True Move wouldbe permitted to take certain actions previously prohibited by therestrictive covenants contained in the indentures, including incurringdebt, making dividends and other restricted payments on True Move'sequity interests, and granting liens.
In addition, the refinancing risks on True Move's bonds would materiallydecline, especially in light of its concession expiring in 2013. The bondrefinancing exercise would also lengthen the debt maturity profile onTrue Move's and True Corp's debt, as well as eliminate foreign exchangevolatility by better aligning the domestic currency denominated bankfacility with the domestic currency revenue stream.
However, the proposed changes will have no effect on the existingguarantees on the notes, and company's obligations under the notes andindentures will stay guaranteed by the parent guarantor and thesubsidiary guarantors. As such, we do not anticipate subordination risksfor any remaining notes which may not be tendered under the offer.
True Move plans to refinance the tendered notes through partial proceedsof a 10-year Bt48.9 billion secured bank facility signed with Krung ThaiBank and Siam Commercial Bank. We expect the bank facility to haveamortizing repayment terms, with some grace period.
Moody's notes that True Move's liquidity profile has alreadysubstantially improved since the company repaid the outstanding amountsunder its facilities from IFC and KfW in Q2 2011, thus eliminating theneed for continuous covenant waivers. An equity injection of Bt4 billionfrom True Move's parent company has further enhanced its liquidityprofile.
Furthermore, surplus amounts under the Bt48.9 billion new bank facility,after utilizing Bt27 billion for the buyback of bonds and Bt6.3 billionfor refinancing a bridge facility for the Hutch acquisition, would leaveTrue's wireless group with adequate resources for investments in its 3Gbusiness, network expansion, and potential bidding for new spectrumlicenses when announced by Thailand's telecoms regulator.
However, the negative outlook continues to reflect liquidity andrefinancing risks for the company, pending the final outcome of thetender offer and attached refinancing. The tender offer is expected to
expire on 4 October 2011.
The current B2 ratings encapsulate True Move and True Corp's exposure toan uncertain and politicized regulatory environment for telecom playersin Thailand, which has had an overhang effect on the rating. Moody's isalso concerned about the execution risks for the HSPA 3G upgrade and the
migration of subscribers from the CDMA network to the new HSPA platform.
Owing to the unpredictability of Thailand's regulatory environment, thereis no clear indication whether True Move can migrate its subscribers tothe new network before its concession expires in September 2013.
True Move's credit profile is highly correlated with True Corp's, giventheir strong financial and operating links, and as such their ratings areequalized.
Following the repayment of True Move's current secured facilities in thelast April-June quarter, there is no sponsor support agreement obligatingTrue Corp to provide financial support to True Move. However, given TrueMove's relative importance to the consolidated group, contributing 49% ofthe consolidated revenue, it is Moody's expectation that support fromTrue Corp will remain forthcoming.
The principal methodology used in this rating was GlobalTelecommunications Industry, published in December 2010. Please see theCredit Policy page on www.moodys.com for a copy of these methodologies.
Headquartered in Bangkok, True Corp is an integrated provider offixed-line, broadband, internet, and mobile services, and pay TV. TrueCorp is listed on the Thai Stock Exchange; the Charoen Pokphand Group (CPGroup) is the major shareholder (64.74%).
Its wireless business is conducted predominantly through its 97.1%-ownedsubsidiary, True Move, Thailand's third largest mobile telecommunicationsoperator. Its pay TV business is conducted through 99.3%-owned TrueVisions Public Company Limited (and 99.0%-owned True Visions Cable Public
Company Limited), which is currently the only nationwide provider of paytelevision services in the country.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt, thisannouncement provides relevant regulatory disclosures in relation to eachrating of a subsequently issued bond or note of the same series orcategory/class of debt or pursuant to a program for which the ratings arederived exclusively from existing ratings in accordance with Moody'srating practices. For ratings issued on a support provider, thisannouncement provides relevant regulatory disclosures in relation to therating action on the support provider and in relation to each particularrating action for securities that derive their credit ratings from thesupport provider's credit rating. For provisional ratings, thisannouncement provides relevant regulatory disclosures in relation to theprovisional rating assigned, and in relation to a definitive rating thatmay be assigned subsequent to the final issuance of the debt, in eachcase where the transaction structure and terms have not changed prior tothe assignment of the definitive rating in a manner that would haveaffected the rating. For further information please see the ratings tab
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