Bangkok--14 Nov--Fitch Ratings
Fitch Ratings (Thailand) Limited has placed SVI Public Company Limited’s (SVI) National Long-Term Rating of ‘BBB+(tha)’ and National Short-Term Rating of ‘F2(tha)’ on Rating Watch Negative (RWN) following a fire at its production plant in Bangkadi Industrial Estate in Pathumthani Province on 12 November 2014.
While it is too early to quantify the losses, SVI is likely to face revenue disruption before it restores its production capacity.
Although the financial impact is likely to be mitigated by insurance for property damage and business interruption, there remains the risk that manufacturing disruption could lead to a loss of customer confidence in the company. This could negatively affect SVI’s business in assembly and electronic manufacturing services in the medium term. In the short term, SVI’s strong liquidity - a cash balance of THB2.2bn at end-9M14 - should provide flexibility to fund investment needed to restore capacity.
The RWN will be resolved once Fitch has more clarity on the impact of the fire on SVI’s business and financial profiles, as well as on management’s strategy to maintain customer confidence and restore operations. SVI’s ratings may be downgraded if deterioration in customer confidence leads to a loss of key customers, which significantly reduces earnings prospects, resulting in operating EBITDAR margin falling below 6% and funds flow from operations-adjusted net leverage exceeding 1.0x, both on a sustained basis.